Progress made in Greek bailout talks, says Juncker

Wed, Feb 15, 2012, 00:00

Eurogroup chief Jean-Claude Juncker today said he is confident that euro-area finance ministers will be able to make a decision on a Greek bailout on February 20th.

The Luxembourg premier said the group received "strong assurances" from the leaders of the two coalition parties in Greece's government that they will support the austerity programme.

Mr Juncker issued a statement saying progress had been been but provided few details.

He said the ECB, IMF and European Commission had completed a report into Greece's debt sustainability - a precondition for approving the bailout - and that he expected the Eurogroup to be able to take the necessary decisions on Athens at the next meeting on Monday.

Greek finance minister Evangelos Venizelos said his country has met all the prerequisites required for a second bailout package from the European Union and International Monetary Fund to proceed and that he was confident of approval at the next meeting.

In comments to reporters in Athens, Mr Venizelos said euro area finance ministers raised concerns about the social and political situation in Greece.

Mr Venizelos also accused some euro-area nations of wanting Greece to leave the union. "We are continually faced with new terms. . . . In the euro area, there are plenty who don't want us anymore," he said.

"There are some playing with fire, domestically and abroad. Some are playing with torches and some are playing with matches. But the risk is equally great."

Greece's leaders are battling to salvage a new €130 billion EU/IMF bailout and banish doubts over their commitment to a punishing austerity package.

But with mistrust of Athens high, several EU sources told Reuters that finance officials in the 17-state currency union were studying whether it was possible to delay part or all of the rescue deal while still avoiding a disorderly default - news which pushed safe haven German Bund futures to session highs.

Greece's conservative party leader Antonis Samaras, widely tipped as the country's next prime minister, pledged in writing that if elected he would stick to an agreed programme of welfare and job cuts that triggered riots in central Athens this week.

"If Nea Demokratia [New Democracy] wins the next election in Greece, we will remain committed to the Program's objectives, targets and key policies as described in the MoU/MEFP," Mr Samaras wrote, referring to the Memorandum of Understanding on the deal and the Memorandum of Economic and Financial Policies.

But Mr Samaras, who leads voter surveys ahead of an election that could come as early as April, insisted the fast-shrinking Greek economy must also be kick-started into life and reserved the right to adapt details of the package accordingly.

"Prioritising recovery along with the other objectives will only make the programme more effective and the adjustment effort more successful. Therefore . . . policy modifications might be required to guarantee the full programme's implementation," he said in the letter to Greece's international lenders.

Greece has said it must initiate a debt swap deal with private sector bondholders by Friday to meet a March 20th deadline for €14.5 billion in debt repayments. It was hoping to have the euro zone's backing for its second bailout this week.

But EU sources said some in the euro zone doubted the commitment of Greece's leaders to austerity, and queried whether it would be enough to bring Greece's debt-to-GDP ratio down from 160 per cent now to a target of 120 per cent by 2020.

"There are proposals to delay the Greek package or to split it, so that an immediate default is avoided, but not everything is committed to," one official briefed on preparations for a euro zone finance ministers call later in the day told Reuters.

"They'll discuss the options," he said, adding: "There is pressure from several countries to hold off until there is a concrete commitment from Greece, which may not come until after they've held elections."

Mr Samaras's belated commitment to honour the austerity plan may put that plan on the back burner.

Rioters torched buildings across Athens late on Sunday as Greek lawmakers passed the austerity bill, of which around €325 million of cuts still need to be identified.

But after a series of broken promises since Athens was first bailed out in May 2010, trust is in short supply.

"When you look at the internal political discussions in Greece and the opinion polls, then you have to ask who will really guarantee after the elections . . . that Greece will stand by what we are now agreeing with Greece," German finance minister Wolfgang Schäuble told SWR2 radio.

"I am also not yet sure that all political parties in Greece are aware of their responsibility for the difficult situation their country is in," Mr Schäuble said, adding the EU remained committed to helping Greece if it honoured its promises.