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European Ministers Are Poised to Approve Greek Rescue

Monday, 20 February 2012 05:43 By Stephen Castle, Truthout | Report
European Ministers Are Poised to Approve Greek Rescue

A man waits at a window near shopping carts of unorganized files and forms at a tax office in Athens, Greece, May 20, 2011. In exchange for the bailout money that Greece needs by March to avoid what could be a catastrophic default, the country's foreign lenders have demanded radical changes to make the state more efficient and bring in more tax revenue. (Photo: Eirini Vourloumis / The New York Times)

Brussels — After months of fraught negotiation, euro zone finance ministers were poised to bring Greece back from the brink of default Monday by agreeing to a second giant bailout in exchange for severe austerity measures — and subject to strict conditions.

Ahead of the crucial meeting in Brussels, the French Finance Minister Francois Baroin said that all the conditions were in place for the €130 billion, or $172 billion, bailout, a package that would also see private investors in Greek debt taking steep losses on their holdings.

The Greek finance minister, Evangelos Venizelos, said his government also believed it had met all the conditions for a second bailout to be released.

“We expect today the long period of uncertainty — which was in the interest of neither the Greek economy not the euro zone as a whole — to end,” Mr. Venizelos said in a statement issued after his arrival in Brussels. “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.”

A decision to sign off on the rescue could mark another turning point in the debt crisis, which has raised questions about the viability of the euro itself.

Stricter rules on controlling euro zone debt and budget deficits are already in place, and next week European leaders are expected to agree on a new, higher, firewall for euro countries that get into financial trouble — a step that policy makers hope will mark the beginning of the end of the saga.

Nevertheless Greece still remains an Achilles heel for the 17-nation currency because of doubts about its ability to implement the tough measures pushed through Parliament, or to manage an economy that is slipping further into recession.

The steady deterioration of the public finances in Athens have left the country’s creditors with problems in making the figures for Monday’s bailout add up.

Under the bailout terms Greece is supposed to reduce its enormous debt stock to 120 percent of gross domestic product by 2020, from about 160 percent now. However, the latest estimates suggest that figure would be closer to 129 percent, leaving a financing gap that the euro zone, the European Central Bank and the International Monetary Fund need to see plugged Monday.

Any deal is likely to be accompanied by controls that represent an unprecedented intrusion into the economic management of a sovereign nation.

The bailout cash is likely to be paid into a special “escrow” account that will prioritize debt servicing before money is released to general government coffers.

Greece will also be encouraged to accept outside help to improve its administration and, in particular, its tax collection system.

“We have all the elements for an agreement” Mr. Baroin said on Europe 1 radio ahead of the meeting, which was scheduled to start around 3.30 p.m. Brussels time.

“There are many structural reforms underway. We can’t wait because of the payment that is due in March,” he added, referring to a €14.5 billion repayment of Greek debt due on March 20.

The second bailout was first promised last October, but agreement has been delayed as international creditors pressed for more concessions from Greece and stricter controls on its government.

Critics, who suspected that Greece was banking on the euro zone’s desire to avert a default, accused the government in Athens of stalling on essential economic measures. Meanwhile, the caretaker government in Athens, led by Lucas Papademos, had to cope with mounting opposition to austerity measures.

As temperatures rose last week the Greek finance minister suggested some were trying to drive his country out of the euro and the Greek President, Karolos Papoulias, accused the German finance minister, Wolfgang Schäuble, of insulting Greece.

Mr. Papademos flew to Brussels to oversee Monday’s talks, underlining the fact that, after weeks of brinkmanship and some bitter exchanges, there was political will to seal a deal.

Even politicians from the “triple A” rated countries in Europe seemed ready to give Greek politicians some credit.

In Helsinki, the Finnish Finance Minister, Jutta Urpilainen , said that Greece had done what had been asked of it. “A big issue is that we have to get Greece’s debt on a level that is sustainable and enables Greece to survive,” she added, Reuters reported.

Niki Kitsantonis contributed reporting from Athens.

This article, "European Ministers Are Poised to Approve Greek Rescue," originally appeared in The New York Times.


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European Ministers Are Poised to Approve Greek Rescue

Monday, 20 February 2012 05:43 By Stephen Castle, Truthout | Report
European Ministers Are Poised to Approve Greek Rescue

A man waits at a window near shopping carts of unorganized files and forms at a tax office in Athens, Greece, May 20, 2011. In exchange for the bailout money that Greece needs by March to avoid what could be a catastrophic default, the country's foreign lenders have demanded radical changes to make the state more efficient and bring in more tax revenue. (Photo: Eirini Vourloumis / The New York Times)

Brussels — After months of fraught negotiation, euro zone finance ministers were poised to bring Greece back from the brink of default Monday by agreeing to a second giant bailout in exchange for severe austerity measures — and subject to strict conditions.

Ahead of the crucial meeting in Brussels, the French Finance Minister Francois Baroin said that all the conditions were in place for the €130 billion, or $172 billion, bailout, a package that would also see private investors in Greek debt taking steep losses on their holdings.

The Greek finance minister, Evangelos Venizelos, said his government also believed it had met all the conditions for a second bailout to be released.

“We expect today the long period of uncertainty — which was in the interest of neither the Greek economy not the euro zone as a whole — to end,” Mr. Venizelos said in a statement issued after his arrival in Brussels. “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.”

A decision to sign off on the rescue could mark another turning point in the debt crisis, which has raised questions about the viability of the euro itself.

Stricter rules on controlling euro zone debt and budget deficits are already in place, and next week European leaders are expected to agree on a new, higher, firewall for euro countries that get into financial trouble — a step that policy makers hope will mark the beginning of the end of the saga.

Nevertheless Greece still remains an Achilles heel for the 17-nation currency because of doubts about its ability to implement the tough measures pushed through Parliament, or to manage an economy that is slipping further into recession.

The steady deterioration of the public finances in Athens have left the country’s creditors with problems in making the figures for Monday’s bailout add up.

Under the bailout terms Greece is supposed to reduce its enormous debt stock to 120 percent of gross domestic product by 2020, from about 160 percent now. However, the latest estimates suggest that figure would be closer to 129 percent, leaving a financing gap that the euro zone, the European Central Bank and the International Monetary Fund need to see plugged Monday.

Any deal is likely to be accompanied by controls that represent an unprecedented intrusion into the economic management of a sovereign nation.

The bailout cash is likely to be paid into a special “escrow” account that will prioritize debt servicing before money is released to general government coffers.

Greece will also be encouraged to accept outside help to improve its administration and, in particular, its tax collection system.

“We have all the elements for an agreement” Mr. Baroin said on Europe 1 radio ahead of the meeting, which was scheduled to start around 3.30 p.m. Brussels time.

“There are many structural reforms underway. We can’t wait because of the payment that is due in March,” he added, referring to a €14.5 billion repayment of Greek debt due on March 20.

The second bailout was first promised last October, but agreement has been delayed as international creditors pressed for more concessions from Greece and stricter controls on its government.

Critics, who suspected that Greece was banking on the euro zone’s desire to avert a default, accused the government in Athens of stalling on essential economic measures. Meanwhile, the caretaker government in Athens, led by Lucas Papademos, had to cope with mounting opposition to austerity measures.

As temperatures rose last week the Greek finance minister suggested some were trying to drive his country out of the euro and the Greek President, Karolos Papoulias, accused the German finance minister, Wolfgang Schäuble, of insulting Greece.

Mr. Papademos flew to Brussels to oversee Monday’s talks, underlining the fact that, after weeks of brinkmanship and some bitter exchanges, there was political will to seal a deal.

Even politicians from the “triple A” rated countries in Europe seemed ready to give Greek politicians some credit.

In Helsinki, the Finnish Finance Minister, Jutta Urpilainen , said that Greece had done what had been asked of it. “A big issue is that we have to get Greece’s debt on a level that is sustainable and enables Greece to survive,” she added, Reuters reported.

Niki Kitsantonis contributed reporting from Athens.

This article, "European Ministers Are Poised to Approve Greek Rescue," originally appeared in The New York Times.


Hide Comments

blog comments powered by Disqus