15 Feb 2012

Greek meeting cancelled

12:26 pm on 15 February 2012

A meeting of European finance ministers, to discuss the financial crisis in Greece, has been cancelled because the necessary assurances about its austerity plan have not yet given.

Eurogroup president Jean-Claude Juncker says the talks will be replaced by a conference call, because technical work with Greece is still needed in a number of areas.

European Central Bank president Mario Draghi and the Commissioner for Economic and Monetary Affairs Olli Rehn were also to attend the meeting.

Greece was hoping the ministers would approve a 130 billion euro bailout, which is needed to avoid defaulting on 14.5 billion euro in debt on 20 March.

CMC Markets senior markets analyst Michael Hewson says a disorderly default now looks inevitable because Germany is taking a hard line on extra cuts of 325 million euro.

Further contraction

The deterioration of the Greek economy accelerated in the final three months of last year.

The economy contracted by 7% in the fourth quarter of 2011, compared with the same period a year earlier.

That's an acceleration from the 5% contraction in the third quarter.

Overall, the economy shrank 6% last year, an increase on earlier estimates and the fifth year of recession.

RBC Capital Markets European economist James Ashley says Greece's focus must change from cutting the deficit, to stimulating growth.

Despite Greece's dire economic condition, the government sold 1.3 billion euros of debt on Tuesday.

The interest rate for three months was 4.61%, slightly less than at the previous auction in January.