EU-IMF to keep Greece in suspense until Wednesday

Feb 10, 2012, 0:25 GMT

By Alvise Armellini, dpa Eds: Updates with outcome of meeting =

Brussels (dpa) - International lenders refused Thursday to agree to a second bailout for Greece, indicating that they would wait until next week for Athens to give guarantees on the austerity measures and economic reforms it was offering in return.

Eurozone finance ministers met in Brussels just hours after Greek Prime Minister Lucas Papademos announced that a last-minute deal had been struck with the so-called troika of the European Union, International Monetary Fund (IMF) and European Central Bank (ECB).

But it was not enough.

'Despite all the important progress achieved over the last days, we did not yet have all the elements on the table to take decisions today,' said the head of the so-called Eurogroup, Luxembourg Prime Minister Jean-Claude Juncker.

In Athens, the three party leaders supporting Papademos' administration had reportedly agreed to a swathe of tough measures, including cuts in the minimum wage, public-sector pay freezes and layoffs, and tax and labour-market reforms, as well as privatizations.

Since coming under EU-IMF oversight in 2010, Greece has consistently failed to deliver on economic reform commitments and deficit-trimming targets, and there is uncertainty whether a new government after elections in April would stick to the troika terms.

'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,' Juncker said.

Greece, which risks default next month, is waiting for the euro area and the IMF to sign off on a 130-billion-euro rescue package.

But Juncker set three conditions for releasing the aid: The Greek Parliament must approve austerity measures on Sunday; the Greek government must cover a 325-million-euro (432-million-dollar) budget shortfall for 2012; and Greek party leaders must offer 'strong political assurances' on promised reforms.

In addition, EU Economy Commissioner Olli Rehn said a Franco-German idea to create a special escrow account that would prioritize Greek debt repayments over other types of government expenditure was being 'seriously' considered.

Eurozone ministers will meet again Wednesday in Brussels to decide whether conditions are in place to proceed, Juncker said.

Greece appeared to have satisfied eurozone peers on at least one other key requirement for the bailout: reaching a bond swap agreement with private creditors, who would forego 100 billion euros in Greek debt holdings.

The deal was 'practically finalized,' Rehn told reporters. 'The (European) Commission is satisfied with the outcome.'

Greece's aid package needs to be signed off by the end of next week if it is to be ready in time by March 20, when Athens faces a 14.5-billion-euro bond repayment.

On Thursday, German Finance Minister Wolfgang Schauble was in no mood to be rushed. 'There will be no results today,' he warned before entering the Brussels talks.

In the meeting, Germany, the Netherlands and Finland 'grilled' Greek Finance Minister Evangelos Venizelos and insisted on receiving written assurances on the deficit-trimming and economic reforms, an official in the room said.

Afterward, Juncker admitted that there were 'sometimes tough exchanges' during the five-and-a-half hour talks.

IMF chief Christine Lagarde, who was also in Brussels, said there was 'some very encouraging news coming out of Athens,' but added that 'there are still things to do.'

Austrian Finance Minister Maria Fekter said the IMF needed to calculate whether the deals struck in Athens would be enough to bring Greece's debt down to 120 per cent of gross domestic product by 2020, from a projected peak of 187 per cent next year.

Speaking earlier in Frankfurt, ECB President Mario Draghi said there was 'no plan B' for Greece, and expressed confidence that a solution would be found for the country's debt woes.

Athens was granted an initial 110-billion-euro bailout from the EU and the IMF in 2010. The sum had been meant to cover its needs until mid-2013, but Greece has ran out of money more than a year ahead of schedule.

In October, the EU and the IMF calculated that Athens would require no more than 130 billion euros in new assistance, but the bill is expected to be higher now due to the country's worsened economic outlook.

Draghi refused to comment on reports that the ECB might help plug the budget gap by foregoing interest on its Greek bond holdings - a concession thought to be worth about 11 billion euros. In Brussels, Rehn and Juncker ducked questions on the issue.