It’s unclear whether that will be enough to satisfy investors for long. Stocks improved following last week’s turmoil as speculation grew that Greece’s bailout creditors will look to impose bigger losses on Greece’s private bondholders as well as recapitalize Europe’s banks and expand the eurozone’s rescue fund. So far, there’s been no confirmation from Europe’s capitals that such a comprehensive solution is being planned.
Financial markets closely watched a meeting between Merkel and Greek Prime Minister George Papandreou, but neither announced any new measures ahead of their private dinner at Berlin’s chancellery on Tuesday evening.
“Through the euro, we are closely bound together, and the weakness of one affects us all,” Merkel said at a news conference.
Germany, Europe’s biggest economy, is seen as a key player in resolving the 17-nation eurozone’s debt crisis, but Merkel’s government has repeatedly been accused over the past 18 months of being a reluctant leader of the rescue efforts. Speaking earlier Tuesday alongside her economy minister, Philip Roesler, Merkel reiterated her conviction that there is no quick solution, saying the crisis must be dealt with “step by step.”
Greece must receive an (euro) 8 billion ($11 billion) rescue loan before mid-October to stave off bankruptcy, a collapse that would send shock waves through markets around the world. But creditors have demanded more efforts to raise revenue.
In response, Greek lawmakers approved a controversial new property tax Tuesday evening, passing it 154-143 in the 300-member parliament. The levy, in addition to public-sector reforms announced earlier, is expected to make up for lagging revenues this year by providing more than (euro) 2 billion ($2.76 billion), or about 1 percent of Greece’s annual gross domestic product.
Greek Finance Minister Evangelos Venizelos said his country will get the money. “The disbursement will be decided in time, in line with the course of our funding needs,” he said.
Greeks have been outraged by tax and other austerity measures, and unions have responded with strikes and protests. Even as Venizelos spoke, protesting ministry employees and tax office workers chanted outside his department in Athens.
Venizelos said Greece had made great efforts to achieve its fiscal targets, but that a “hyper-effort” is necessary to fully meet its commitments.
Venizelos said representatives from the International Monetary Fund, the European Commission and the European Central Bank will return to Athens this week. The so-called troika suspended its review in early September amid talk of missed targets and budget shortfalls.
The current plan is to have Greece implement painful debt-reduction measures in exchange for rescue loans. Greece relies on funds from last year’s (euro) 110 billion ($149 billion) package, and European leaders also have agreed on a second (euro) 109 billion bailout, although some details of that remain to be worked out.
“We want a strong Greece within the eurozone, and Germany is prepared to offer all necessary assistance,” Merkel said in Berlin.
Papandreou, in return, pledged to implement the reforms demanded by Greece’s international creditors. Speaking through a translator, he said this is a time “of great sacrifices for the Greek people. Therefore it is of great importance to receive signals of support from our European partners.”
Ahead of the meeting between the two leaders, Merkel’s government downplayed speculation of bold new moves to tackle Europe’s sprawling sovereign debt crisis.
German Finance Minister Wolfgang Schaeuble ruled out increasing the eurozone’s new (euro) 440 billion ($595 billion) rescue fund, calling it “a silly idea” that could ultimately endanger the AAA ratings of the main creditor countries such as Germany and the Netherlands.
Greece’s new property tax will range from (euro) 4.00 to (euro) 20.00 ($5.50-$27.50) for every square meter (10.7 square feet). It will be charged through electricity bills to make it easier for the state to collect, instead of going through Greece’s unwieldy and inefficient tax system. Those who refuse to pay will risk having their power cut off.
The extra charge has deeply angered Greeks, who have already been through more than a year of sharp austerity measures, including salary and pension cuts and higher taxes.
State electricity company unionists have threatened not to collect the tax. Public transport workers walked off the job Tuesday for two days, and were to be joined by taxi drivers on Wednesday. Tax office and customs workers also were on strike.
Police briefly scuffled with protesters outside parliament shortly after Tuesday’s vote there and used pepper spray to disperse one group of youths.