Eurozone demands more sacrifices from Greece & banks

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Eurozone demands more sacrifices from Greece & banks

Eurozone demands more sacrifices from Greece & banks

Tuesday, January 24, 2012
  • fek
Fekter spoke about IMF plans for a new programme for Greece but said all parties must agree to it.

BRUSSELS: European finance ministers told Greece on Tuesday to stop dragging its feet on economic reforms if it wants a new bailout while urging bank creditors to make more sacrifices to tame the country's debt.

 

The eurozone wants a written pledge from the technocrat-led government in Athens as well as other political parties before unlocking a new 130-billion-euro ($170 billion) rescue for the country, said Austrian Finance Minister Maria Fekter.

 

"The IMF will work on a new programme with the Greeks, but we will only be able to agree on it if the ruling parties and the other parties agree on it," she said on arrival for a second day of talks among EU finance ministers.

 

"Only if we have this written statement will there be further aid," she said.

 

The eurozone had already secured written pledges from the parties supporting the technocrat government led by Prime Minister Lucas Papademos that took over in November in order to release an instalment of eight billion euros from the first, 110-billion-euro bailout the country was granted in May 2010.

 

Other European finance ministers piled pressure on Greece to forge ahead with structural reforms and also demanded that the country's private creditors make sacrifices by accepting a massive debt writedown.

 

"It's quite clear that the implementation in Greece has failed," said Swedish Finance Minister Anders Borg, whose country is not part of the eurozone but participated in a first bailout of Greece in May 2010.

 

"When it comes to structural reform, when it comes to fiscal reform they have not delivered," he said.

 

After a first day of talks that ended late Monday, Luxembourg Premier Jean-Claude Juncker, who heads the group of eurozone finance ministers, said the Greek programme was off track.

 

Juncker said eurozone finance ministers want Greece and its EU-IMF auditors to agree the key parameters of an ambitious adjustment programme as soon as possible.

 

The European Union's economic affairs commissioner Olli Rehn said Athens would have to accelerate the implementation of structural reforms to labour and other markets.

 

With Greece locked in complex negotiations with banks, Juncker pressed the private sector to accept a bond swap deal with an interest rate well below the 4.0 per cent the creditors were asking.

 

"I think it is a difficult deal and I think that banks must realise that their negotiation position is not that strong," Borg said.

 

The head of the Institute of International Finance, Charles Dallara, declared at the weekend that it had put the best possible offer on the table and that it was now up to Europe and the IMF to decide between a voluntary PSI (private sector involvement) deal or a default.

 

Negotiators delayed late on Monday the deadline for a deal on a debt reduction until February 13.

 

Diplomats, though, said that meeting the new timetable would require a deal by February 3 in practice, given the legal hurdles that will need to be cleared.

 

"We have the green light of the Eurogroup to close a deal with the private sector in the next few days," Greek Finance Minister Angelos Venizelos said on arrival for the second day of talks.

 

Eurozone leaders offered Greece last year a new, 130-billion-euro rescue package conditioned on a debt writedown with private lenders worth 100 billion euros.

 

The goal is to reduce the Greek debt mountain from around 160 per cent of gross domestic product currently to about 120 per cent in 2020.

 

"Greece and the banks have to do more in order to reach a sustainable debt level," said Dutch Finance Minister Jan Kees de Jager.

 

"And we have to await the discussions about that because a sustainable debt level is absolutely a precondition for the next programme," he said.

 

Greece is running short on time, with a bond redemption totalling 14.4 billion euros due on March 20 that it would unlikely have sufficient funds to settle.