THE EUROPEAN powers embark on a final push this weekend to complete the second Greek bailout, an effort dogged by lingering anxiety that the plan will still leave the country with too much debt.
The talks remain “fluid”, said an official involved in preparations for the meeting, although EU leaders have been talking up the progress made.
German chancellor Angela Merkel spoke by phone for 50 minutes with Greek premier Lucas Papademos and Italian prime minister Mario Monti.
“The discussion took place in a constructive atmosphere and the three participants expect that the euro group meeting on Monday will reach decisions on Greece,” said a statement last night from Mr Papademos.
The situation is increasingly urgent as time is fast running out for Greece to put in place a debt restructuring arrangement with its private creditors before a €14.5 billion debt falls due on March 20th.
This element of the package, under negotiation since last July, is subject to agreement being reached on the EU-International Monetary Fund loan agreement.
The discussions on the new bailout have been portrayed by many in Europe and by Greece itself as the last opportunity for the country to put its wayward finances in order or face a catastrophic default and departure from the euro.
The EU authorities hope that they will be able to iron out the remaining uncertainties in the contentious deal at talks tomorrow in Brussels between finance ministry officials.
After weeks of brinkmanship, rows and delays, the aim tomorrow is to have all elements of the package ready for settlement when euro finance ministers arrive in the city on Monday for two days of talks on the debt crisis.
The talks begin mid-afternoon on Monday and the ministers will be under pressure to conclude the deal that night, as their non-euro counterparts are due in Brussels for separate talks on Tuesday.
Still at issue, however, is a multibillion-euro funding gap the authorities need to fill to ensure Greece meets their target of cutting the country’s debt to 120 per cent of national output by 2020.
Also in question is the use of an escrow account to reserve bailout funds for debt repayments, thus intensifying pressure on Greece to boost tax revenues.
Further questions surround the deployment of dozens of full-time EU inspectors to ensure the authorities in Athens implement the plan in full.
Although Greece stands to receive €130 billion in emergency loans and a €100 billion debt reduction, the latest assessment by the EU-IMF-European Central Bank “troika” suggests Greece will still be left with a debt amounting to 129 per cent of gross domestic product in 2020.
That is well below the present level – roughly 160 per cent – but sufficiently above target to raise serious questions as to whether Greece’s debt will still be unsustainable.
Jean-Claude Juncker of Luxembourg, president of the ministers’ group, acknowledged such doubts last night, saying a debt restructuring plan to achieve the 120 per cent target was still “far away” from fruition.
“All the discussions I will have . . . until Sunday night will try to move the figure nearer to the target,” he said.
The meeting on Monday, scheduled for months, comes days after Mr Juncker scrapped plans for a meeting last Wednesday as tensions flared between Greece and its sponsors.
Germany – with the support of fellow triple-A-rated countries Finland and the Netherlands – has pushed for the bailout to be divided in two, with bridge loans offered initially before the final deal is signed after the election.
Berlin pulled back from that demand, however, after officials warned that a deal with private creditors would be unlikely in that context.
Many European countries are unhappy with Greek leaders for repeatedly failing to execute promises under the country’s first EU-IMF rescue, worth €110 billion. They are also concerned that a general election, which is expected in April, will result in the winners backsliding on their commitments.