Eurozone finance ministers on Monday have failed to agree a critical €12bn worth of aid payments to Greece, instead vowing to wait until the country has proven itself capable of passing the austerity measures that have caused widespread protests and violence on the streets of Athens. There is now intense pressure for Greece to pass all the austerity measures with no concessions after the Eurozone finance minsters chose to wait rather than continue to sign off money to the debt ridden economy.
The decision to delay the payment turns up the pressure on the Greek Parliament to pass the €28bn in spending cuts and tax increases agreed with national leaders in May. The growing political crisis in Greece has caused fears inside the Eurozone that the austerity measures will not be passed by the Greek Parliament and thus further money can't be seen to be wasted. If the austerity measures do not make safe passage through the Greek Parliament, it seems the Eurozone could be ready to allow the country to default and leave Greece to fend for itself.
The delay from Eurozone finance minsters have caused the markets to wobble on Monday morning. The move will do nothing to alleviate fears of creating financial uncertainty in the markets where the Euro was weaker on Monday morning. The markets are fully aware that the Greek economy needs the €12bn aid programme or the country will default and the response from the markets has added to the financial uncertainty surrounding both Greece and the Eurozone.
Luxembourg Prime Minster, Jean Claude Juncker, said no commitment would be made until Greece acts. He said: "We have to wait for the final approval of the programme on which Greece reached agreement with its European partners," Mr Junker said after the meeting broke up in the early hours on Monday. "As the vote by the Greek parliament has been fixed for the end of June, we cannot make an engagement without knowing if the Greek parliament endorses the commitments made by Greece."
With pressure mounting on both the Greek government and the Eurozone, London Mayor Boris Johnson has joined economists by calling for Greece to be allowed to default and to leave the Eurozone. There are growing calls for a radical change in direction which would result in Greece being allowed to enter bankruptcy and in turn write off many of its debts. This plan could result in millions of Euro's being saved in rescue packages. Boris Johnson has called on the Eurozone to allow Greece a "new economic identity with a new drachma".
The Greek Prime Minster, George Papandreou has warned against taking such measures. The Prime Minster has said that Greece is at a political crossroads and "sudden bankruptcy would be disastrous for Greek households, banks and the country's credibility."
Even if the €12bn Greek aid programme is agreed on, Eurozone finance ministers know a new bailout package will need to be agreed. The single currency has been placed under severe pressure and finance misters are now looking for Greece to prove they can pass the austerity measures before any new money is signed off. Eurozone finance ministers will meet again in early July to discuss a new financing programme but that has done little to provide confidence in the markets.