Greece closes in on bailout, lenders seek more oversight
ATHENS GREECE appears to be closing in on a new international rescue package despite unresolved doubts among eurozone partners about how fast it will manage to bring its debt down.
Athens set out extra austerity measures on Thursday it hopes will clinch a 130 billion euro ($170 billion) bailout, which will save it from bankruptcy next month, at a meeting of finance ministers from the 17-nation eurozone on Monday.
German Chancellor Angela Merkel, Italian Prime Minister Mario Monti and Greek Prime Minister Lucas Papademos are optimistic that an agreement can be reached on Greece at Monday’s Eurogroup meeting, Monti’s office said, after the three leaders held a conference call on Friday.
But negotiations with lenders in the European Union and International Monetary Fund are again going down to the wire, straining ties between Greece and northern members of the currency bloc.
“The scepticism is especially strong among the AAA states over whether Greece will be able to make it,” Germany’s Der Spiegel magazine quoted Austrian Finance Minister Maria Fekter as saying of countries with topnotch credit ratings such as Germany, Finland and the Netherlands.
“The risk of a Greek insolvency is not off the table.” Uncertainty focused on an assessment by the European Commission, the European Central Bank and the IMF predicting Greek debt will be around 129 percent of GDP in 2020, well above a target of 120 percent set in October.
Officials have previously said a target of 125 percent would be acceptable to most eurozone members but further measures will be required to meet even that goal.
Faced with the prospect of a change in the Greek government in April, the eurozone is also seeking greater oversight of the measures Greece is taking to cut its debt, and for the creation of an escrow account to ringfence funds for debt repayment.
Even if Greece secures its second bailout since 2010, officials say there is a growing body of opinion within the eurozone that a new bailout may not solve its problems.
“Honestly speaking, we are thinking about emergency planning if something unexpectedly goes wrong,” Dutch Finance Minister Jan Kees de Jager told the Dutch parliament on Thursday.
“It is prudent policy of every finance minister to think about what can happen in addition to the desired path.” The Dutch minister said if a planned meeting of the Eurogroup of finance ministers had gone ahead two days ago, he and his German and Finnish counterparts would have voted against granting Greece more aid.
At that stage, Athens had not yet clarified how it would fill a hole in its 3.3 billion euros of budget cuts this year.
The Greek government eventually produced an extra 325 million euros in cuts along with written commitments from its party leaders that they would stick to the austerity measures, which the eurozone had also made a condition of more help.
“At the instigation of some countries, the Eurogroup meeting was postponed because we thought it would otherwise head for failure,” de Jager said. “Otherwise, I, my German colleague and my Finnish colleague could not have gone ahead and would only have been able to say no.” Greece needs the funds before 14.5 billion euros of debt repayments fall due on March 20. As well as mistrust in other European capitals, it faces growing hostility at home.