EURO ZONE finance ministers have told Greece that it will have to find €325 million in new cutbacks within days and ensure parliament approves a harsh new austerity plan before they back the country’s second EU-IMF bailout.
The direction from the ministers came as the Government said any resolution to the Greek crisis will make it easier for Ireland to continue its tentative return to private debt markets this year.
The ministers imposed a six-day deadline on Greek authorities to comply with their wishes and said all three parties in its coalition must pledge to implement the austerity plan and continue to do so after a general election expected in April.
The ultimatum from the ministers, who will meet again next Wednesday to sign off on the €130 billion rescue, came at the end of a day in which Greece’s technocrat prime minister Lucas Papademos finally secured his government’s support for the new reform package.
The escalation of pressure on Greece reflects frustration in Europe at the failure of its leaders to execute policies promised in its unsuccessful first bailout. Ministers had signalled as they arrived in Brussels that they would not be endorsing the new bailout straight away.
The ministers will insist that no new loans are released without evidence that Athens is executing the plan in full.
“No disbursement before implementation. We cannot live with a system where promises are made and repeated and repeated and the implementation measures are from time to time too weak,” said Luxem-bourg’s premier Jean-Claude Juncker, chief of the group of ministers.
Mr Juncker said Greek MPs must vote to approve the package next Sunday and said the government must identify an additional €325 million in “structural expenditure reductions” by Wednesday to ensure fiscal targets are met.
Strong political assurances from the three government parties on the implementation of the plan will also be required.
“These three elements need to be in place before we can take decisions,” Mr Juncker told reporters late last night in Brussels.
EU economics commissioner Olli Rehn said a draft agreement with private Greek creditors to restructure the country’s national debt is practically finalised.
The deal will reduce the country’s debt burden “towards” the target of 120 per cent of national output, he said. However, there was no clarity as to how the funding gap required to achieve the 120 per cent target would be bridged.
“The future of Greece is first and foremost in the hands of those who have political responsibility in the government and in the parliament,” Mr Rehn said.
He and Mr Juncker expressed confidence that the parliament will back the plan this weekend. A Greek government spokesman said it was clear that Athens was “still halfway" towards realising its objective of securing the second bailout.
Minister for Finance Michael Noonan said as he arrived in Brussels that the second rescue would help to stabilise the euro zone.
“I think in bond pricing the contagion effect of the crisis in Greece is factored in to bond prices in Ireland, so a Greek resolution would enable us to get back to the markets as we expect to do some time in the course of the year,” he said.
Although Ireland has sufficient funding until late 2014, the Minister said Dublin might seek to build up some advance funds even though that was not necessary. Dublin might also repeat a recent debt-swap to lessen Ireland’s €12 billion refinancing requirement at the start of 2014.
“We have no requirement for funds at present. But it would be strategic for the National Treasury Management Agency in the course of the year to test the market to see at what rate we could get funds and wemight decide to accumulate some funds in advance of requirement,” Mr Noonan said.
Echoing remarks made by many of his counterparts, Mr Noonan said that it was too early to say whether the second Greek bailout was a done deal.