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Eurozone set to deal Greece new bailout hand
February 19, 2012, Sunday
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The eurozone intends tomorrow to draw a line under the contentious second Greek bailout with a deal which they hope will also quell suggestions Athens could be pushed out of the currency area.
After several false starts during weeks of what officials said was "deliberate pressure" to get the ruling class in Athens to change its economic mindset, a strong political and financial signal is now anticipated when the Eurogroup of finance ministers meet in Brussels.
This after Greece enacted fresh spending cuts despite violent protests.
Party leaders seeking power in a general election set for April committed separately to carrying through radical reforms, as hardliners floated a willingness to cut the country adrift.
The Italian government -- until recently, most at risk of financial-market contagion given a massive debt burden there -- said on Friday that German Chancellor Angela Merkel, Italy's Prime Minister Mario Monti and Greek counterpart Lucas Papademos were "confident that a deal can be reached on Greece at the Eurogroup," after telephone talks.
As one negotiator told AFP: "The Greek government might not get everything it wants going forward, but if it tries really hard, it will now get what it needs."
Perhaps significantly, China's Vice President Xi Jinping told the Irish Times, ahead of a visit to Ireland tomorrow, that he believes the economic problems facing the European Union, Beijing's biggest trading partner, "are temporary."
Arguments about how far the eurozone can dictate day-to-day decision-making in sovereign Greece still have a way to run, although former European Central Bank deputy Papademos has already waved the white flag on external surveillance.
Work on the figures will keep officials busy right up until the 3:30pm (1430 GMT) start of the Eurogroup meeting in Brussels, with 11th-hour discussions to iron out details today.
There are still issues to resolve before a deal can be announced that will free the eurozone to park the Greek problem to one side, and return the focus to constructing a financial firewall for the currency as a whole at a March 2 euro summit.
These involve the functioning of an "escrow" account, which would ring-fence monies due to be repaid to eurozone governmental partners, while leaving just enough "incentive," as one source said, to encourage Greek taxation reform and privatisations.
There is also a 5.5-billion-euro hole in the sums, as one senior official revealed to AFP last week.
Ideas being worked on here include lowering the interest on past eurozone loans to Greece, and involving national central banks -- and by extension the European Central Bank itself -- in an exchange of old Greek bonds that had already lost market value for new IOUs.
Germany and the Netherlands still need to get the second bailout past sceptical parliaments, though, so the numbers must remain close to what was originally agreed in October.
Back then, leaders sketched out a 230-billion-euro revamp of a still-unfinished 110-billion May 2010 rescue package (a little over US$300 billion at today's exchange rates).
The first 100 billion of the extra funding was to come from a write-down of debt held by private investors, with another 30 billion euros to refloat Greek banks brought to their knees in that process.
The ministers seem certain to sanction legally-binding offers for the relevant bondholders tomorrow, possibly trimming the so-called Greek bank "sweeteners" but also committing European Financial Stability Facility resources to underwrite the offer period.
The first bailout proved insufficient for a country still carrying 350 billion euros in debts, while struggling through a fifth year in recession with social tensions frequently boiling over.
The crunch has come because Greece faces a bond repayments bill of 14.5 billion on March 20.
The rest of the eurozone, though, is not handing over money with no strings attached -- it's more like putting Athens on the aid equivalent of a hospital drip, with a small army of EU officials heading to Athens to make sure Greece delivers on its promises too.
Further law changes may be sought while the banks mull the terms of the debt write-down underpinning the bailout, to cover alternatives were the offer to flop.
The bottom line is that EU partners see Greece as the victim of chronic financial mismanagement by dynastic political forces -- what Monti last week called a "perfect catalogue" of errors.--AFP
After several false starts during weeks of what officials said was "deliberate pressure" to get the ruling class in Athens to change its economic mindset, a strong political and financial signal is now anticipated when the Eurogroup of finance ministers meet in Brussels.
This after Greece enacted fresh spending cuts despite violent protests.
Party leaders seeking power in a general election set for April committed separately to carrying through radical reforms, as hardliners floated a willingness to cut the country adrift.
The Italian government -- until recently, most at risk of financial-market contagion given a massive debt burden there -- said on Friday that German Chancellor Angela Merkel, Italy's Prime Minister Mario Monti and Greek counterpart Lucas Papademos were "confident that a deal can be reached on Greece at the Eurogroup," after telephone talks.
As one negotiator told AFP: "The Greek government might not get everything it wants going forward, but if it tries really hard, it will now get what it needs."
Perhaps significantly, China's Vice President Xi Jinping told the Irish Times, ahead of a visit to Ireland tomorrow, that he believes the economic problems facing the European Union, Beijing's biggest trading partner, "are temporary."
Arguments about how far the eurozone can dictate day-to-day decision-making in sovereign Greece still have a way to run, although former European Central Bank deputy Papademos has already waved the white flag on external surveillance.
Work on the figures will keep officials busy right up until the 3:30pm (1430 GMT) start of the Eurogroup meeting in Brussels, with 11th-hour discussions to iron out details today.
There are still issues to resolve before a deal can be announced that will free the eurozone to park the Greek problem to one side, and return the focus to constructing a financial firewall for the currency as a whole at a March 2 euro summit.
These involve the functioning of an "escrow" account, which would ring-fence monies due to be repaid to eurozone governmental partners, while leaving just enough "incentive," as one source said, to encourage Greek taxation reform and privatisations.
There is also a 5.5-billion-euro hole in the sums, as one senior official revealed to AFP last week.
Ideas being worked on here include lowering the interest on past eurozone loans to Greece, and involving national central banks -- and by extension the European Central Bank itself -- in an exchange of old Greek bonds that had already lost market value for new IOUs.
Germany and the Netherlands still need to get the second bailout past sceptical parliaments, though, so the numbers must remain close to what was originally agreed in October.
Back then, leaders sketched out a 230-billion-euro revamp of a still-unfinished 110-billion May 2010 rescue package (a little over US$300 billion at today's exchange rates).
The first 100 billion of the extra funding was to come from a write-down of debt held by private investors, with another 30 billion euros to refloat Greek banks brought to their knees in that process.
The ministers seem certain to sanction legally-binding offers for the relevant bondholders tomorrow, possibly trimming the so-called Greek bank "sweeteners" but also committing European Financial Stability Facility resources to underwrite the offer period.
The first bailout proved insufficient for a country still carrying 350 billion euros in debts, while struggling through a fifth year in recession with social tensions frequently boiling over.
The crunch has come because Greece faces a bond repayments bill of 14.5 billion on March 20.
The rest of the eurozone, though, is not handing over money with no strings attached -- it's more like putting Athens on the aid equivalent of a hospital drip, with a small army of EU officials heading to Athens to make sure Greece delivers on its promises too.
Further law changes may be sought while the banks mull the terms of the debt write-down underpinning the bailout, to cover alternatives were the offer to flop.
The bottom line is that EU partners see Greece as the victim of chronic financial mismanagement by dynastic political forces -- what Monti last week called a "perfect catalogue" of errors.--AFP
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