Following a nationwide general strike, riots and an attempt to storm the Greek Parliament, Prime Minister George Papandreou stated that his 28 billion euro (£25 billion) austerity plan was the only viable way to get the country back on its feet, arguing that if the package was not approved Greece would run out of money within weeks. However, in passing further measures to increase taxation and cut spending the Pasok government is facing mounting unpopularity.
Amid growing fears that Greece is within weeks of being forced to default on its estimated £300 billion government debt, last week’s European Council summit agreed a second bailout worth 120 billion euro designed to help keep Greece afloat until the end of 2014.
Although details of the second bailout package have not been discussed in detail, EU leaders are being urged to ensure terms are not such that Greece’s economy, which has been plunged into recession following last year’s failed bailout, is weakened further.
Meanwhile, European leaders are urging their national banks to voluntarily defer repayment on Greek debt, warning that the alternative could involve Greece being forced to make a cut on its debts of between 25 and 50 per cent. Although the German Chancellor Angela Merkel is among those who are in favour of the financial sector incurring losses on their Greek holdings, credit rating agencies have warned that they would classify this as a default.
