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Athens Accused of Bid to Amend Austerity Deal

Peter Spiegel, Financial Times
Thursday, 23 Jun 2011 | 2:37 AM ET

Greece’s new finance minister has attempted to renegotiate parts of the austerity deal struck with international lenders last month, drawing anger from his European counterparts as they battle to find a solution to Athens’ debt crisis.

Image Source | Getty Images

According to officials briefed on the gambit, Evangelos Venizelos proposed changing the 50 billion euros privatization program agreed to by Greek authorities and tried to delay next week’s vote in parliament, insisting it could not be done quickly on procedural grounds.

Both the European Union and the International Monetary Fund have made the passage of the new 28 billion euros austerity program the primary condition for releasing a 12 billion euros bail-out payment, which Greece must receive by July 15 to avoid defaulting on its sovereign debt.

Mr Venizelos’s proposal caused particular consternation because policymakers are already deeply concerned over whether Greece will fully implement the agreed program, which was negotiated over the course of a month with the IMF, European Commission and European Central Bank.

Mr Venizelos’s proposal was roundly rejected by other euro zone finance ministers meeting in Luxembourg on Sunday, as well as by Olli Rehn, the EU’s normally mild-mannered economic chief, who angrily confronted the Greek finance minister at the meeting and insisted no changes could be made.

“He managed to say everything he shouldn’t have said,” said one euro zone diplomat of Mr Venizelos’s proposal.

A Greek government official on Wednesday denied Mr Venizelos had asked for changes in the privatisation program. “It’s absolutely untrue,” the official said.

However, another senior socialist said Mr Venizelos was concerned that all privatization deals should be “individually legislated by parliament” – a move that would cause serious delays.

Prompted by the Greek finance minister’s bid to alter the deal, European officials sent a new “technical team” to Athens on Tuesday to check the legislation that is being voted on by parliament next week.

George Papandreou, the Greek prime minister, narrowly survived a confidence vote on Tuesday and is struggling to keep his slim majority in parliament together ahead of the vote on the package, which is scheduled for next week.

Several officials said Mr Venizelos has since backed down.

One senior European official said Mr Venizelos telephoned the president of the Greek parliament from Luxembourg to win approval for fast-tracking the legislation, a procedure also agreed to by the main opposition leader, Antonis Samaras, on Tuesday.

Several officials and diplomats remain concerned that the Greek government will attempt to wiggle out of the deal, particularly its promise to raise 5 billion euros in privatizations by the end of the year.

Thus far, Athens has not completed a single deal, meaning it must carry out 23 separate disposals in the third and fourth ­quarters.

Two officials said that the Greek government had already changed some parts of the deal unilaterally, without informing the EU or IMF.

“They agreed to the program with the troika and they submitted a different program to the parliament,” said a European diplomat.

On Tuesday, José Manuel Barroso, president of the European Commission, warned Athens that “there is no alternative program”, an apparent reference to Mr Venizelos’ efforts.

“If anyone thinks that: ‘Well, without the program agreed with the EU and the IMF we can still get by somehow, there’s an alternative program,’ that’s not true,” Mr Barroso said.

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