Europe

Eurozone ministers hold lengthy talks on Greek bailout

  • 20 February 2012
  • From the section Europe

Eurozone finance ministers are holding late-night talks to try to secure a vital second bailout for Greece.

They have said they are hopeful of reaching a deal at the Brussels meeting, with France's Francois Baroin saying all the elements are in place.

But his Greek counterpart Evangelis Venizelos said haggling would go on "until the very last minute".

Athens needs the 130bn euros (£110bn; $170bn) in order to avoid bankruptcy next month, when loans must be repaid.

The rescue plan would also write off 100bn euros of debt, with private lenders accepting a 70% reduction in what Greece owes them.

In return, they would receive cash and new bonds, expected to mature in 30 years' time.

Negotiations to write off even more debt are being held in parallel in Brussels between Greek officials and their international lenders on the one hand, and bank chiefs on the other, say officials.

'Permanent presence'

This is the second time Greece has sought a bailout from international lenders.

Jean-Claude Juncker - prime minister of Luxembourg and chairman of the eurozone finance ministers group - said Greece had fulfilled many of the conditions asked of it and he was hopeful the talks would be "the final consultations".

"I am of the opinion that today we have to deliver, because we don't have any more time," he said.

German Finance Minister Wolfgang Schaeuble also said he was "optimistic" a deal would be reached, while Mr Baroin said he would plead for the deal.

"All the elements are in place... both with the bankers, private sector creditors, and public sector creditors, the states and central banks," he told Europe 1 radio.

But as the talks began, Dutch Finance Minister Jan Kees De Jager said he would like to see "some kind of permanent presence" by the EU, International Monetary Fund (IMF) and European Central Bank (ECB) over Greece's revenues and public expenditure.

"When you look at the derailments in Greece which have occurred several times now, it is probably necessary," he said.

Elections ahead

After five straight years of recession, Greece now has a debt greater than 160% of its Gross Domestic Product (GDP).

Eurozone leaders and the IMF said in October that Greek debt should be reduced to the more sustainable level of 120% of GDP by 2020.

Successive rounds of austerity measures, demanded by Greece's international creditors have failed to restore growth and have provoked clashes between protesters and police.

The Greek government fell last year after ex-Prime Minister George Papandreou called for a referendum on the eurozone rescue package.

He was replaced by Lucas Papademos, an unelected technocrat who is expected to lead Greece until parliamentary elections in April.

Measures passed by parliament last week set out 3.3bn euros' worth of cuts to salaries and pensions, and health and defence spending.

Graphic

Several thousand people protested in Athens on Sunday against further cuts agreed by Mr Papademos' cabinet on Saturday - but the numbers were far reduced from the tens of thousands who protested last week.

Mr Venizelos has said he now expects the "long period of uncertainty" to end.

"The Greek people send to Europe the message that they have made, and will make, the necessary sacrifices for our country to regain its position of equality within the European family," he said in a finance ministry statement issued in Brussels on Monday.

IMF chief Christine Lagarde praised the work Greece had done so far and said the IMF was ready to work with them.

US Treasury Secretary Timothy Geithner said the US was encouraging the IMF to support the bailout, but it is not clear how much the IMF will contribute.

Some eurozone finance ministers doubt Greece's commitment to its spending pledges and want strong mechanisms to ensure its debts are paid.

It is not yet clear how the eurozone intends to keep the pressure on Greece to ensure it fulfils its commitments, says the BBC's Europe editor, Gavin Hewitt.

And, he adds, there are doubts that even with the bailout Greece will be able to reduce its debt to a sustainable level.

Funds from elsewhere may need to be found. A first rescue fund of 110bn euros in 2010 was not enough to avert the crisis.

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