Europe’s debt crisis moved no closer to resolution today as the Greek government put off a vote on major new austerity measures and there were new signs in Germany that the crisis is beginning to take its toll on the region’s strongest economy.
Greek Finance Minister Yannis Stournaras told reporters the proposed cuts to €13.5 billion ($17.4 billion Canadian) in spending would go before parliament next week, but warned there would be financial “chaos” if there was no deal.
Greece's bailout creditors want the austerity package passed if they are to hand over more loans that Greece needs to avoid bankruptcy, but the Democratic Left party, a partner in the governing coalition, is threatening to vote against it unless labour reforms included in the package are scrapped.
Prime Minister Antonis Samaras said he had "exhausted all the available time" to try to reach a consensus.
"The problem is not whether we (introduce) this measure or that measure. On the contrary: It is what we would do if no agreement is reached and the country is led into chaos."
Unemployment in Greece has topped 25 per cent, and rapidly worsening poverty is creating cracks in the coalition which is likely to be tested late Thursday when lawmakers are set to vote on a bill giving the government broader powers to privatize public utilities.
And in Germany, the country’s Economy Ministry this month cut its growth forecast for 2013 to one per cent from 1.6 per cent, though it increased this year's outlook slightly from 0.7 per cent to 0.8 per cent.
The number of unemployed people in Germany dropped only slightly in October over the previous month, leaving the overall jobless rate unchanged at 6.5 percent, official data showed Tuesday.
Some 2.753 million people were out of work in October, down 35,000 from September, the Federal Labour Agency said.
When adjusted for seasonal factors, however, the number of jobless rose 20,000 for an unemployment rate of 6.9 per cent — the same as September's rate.
"The weaker economic developments are making themselves noticeable on the labor market," said Labor Agency head Frank Weise.
"But overall the labor market remains robust and in good shape."
Still, economist Carsten Brzeski of ING in Brussels said the numbers portend possible problems down the road for Europe's largest economy.
"It is doubtful whether private consumption can really take over the baton as main growth driver for the German economy," he said in a research note.
"Today's numbers provide further evidence that the labour market is gradually losing steam, indicating the cushioning impact on the economy should peter out in the coming months," said Brzeski, adding however that the slowdown should be "a very gentle one."
Compared with October last year, the number of jobless this month was 16,000 higher.
This evening, German Chancellor Angela Merkel was to meet with the heads of global financial bodies including the International Monetary Fund and the World Trade Organization to discuss the situation of the global economy.
The talks with the IMF's Christine Lagarde, the WTO's Pascal Lamy, the World Bank's Jim Yong Kim, the OECD's Angel Gurria and the International Labor Organization's Guy Ryder are part of regular consultations.