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Second Greek bailout negotiations progress - but hinge on austerity

Greek government has to pass its unpopular austerity plans before accessing either the next batch of its current bailout, or a second bailout.

A priest stands in front of demonstrating police officers outside the Greek Parliament in Athens yesterday.
A priest stands in front of demonstrating police officers outside the Greek Parliament in Athens yesterday.
Image: AP Photo/Petros Giannakouris

A SUMMIT of EU leaders has agreed to a second bailout package for Greece – but it’s implementation will depend on whether Athens can push through a raft of unpopular austerity measures.

Under the austerity plan, the Greek government aims to cut €28bn from its budget over the next five years, as well as raising taxes. Yesterday, it said it would start taxing minimum-wage earners.

The country’s international creditors are pushing to have the package passed by the end of this month and Athens has already been told it will not have access to the next €12bn of its current bailout fund until it passes. Gaining access to those funds is essential if Greece is to avoid defaulting on its next loan payments, due in the middle of next month.

The Irish Central Bank has estimated that Ireland would face a €200m hit if the Greek government defaults, although it believes our banks would escape the impact.

After the first day of the EU summit ended yesterday, European Commission President Jose Manuel Barroso said there was a “real will” among member states to do what was necessary to help Greece.

Barroso also said that the EU was prepared to help Greece access billions of euros through the EU’s development funds. Up to €22bn is still available to Greece through the funds – which do not have to be repaid – but Greece has to prove it can match the funds with its own investment.

Barroso said the EU was prepared to reduce the amount of money the Greek government would have to front to co-fund projects with the funds down from the usual 50 per cent to just 15 per cent.

British Prime Minister David Cameron has vowed to oppose the use of any British taxpayer funds for a second Greek bailout, which is expected to reach at least €110bn. The Independent (UK) reports that Germany’s Angela Merkel is backing Cameron on the issue, although German officials have signalled that Britain may be forced to play a part in the bailout.

Thousands of people have been taking to the streets in Greece to demonstrate against the austerity plans.

- Additional reporting by the AP

Read: Kenny meets Sarkozy as tax issue shifts focus >

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