EU calls for bailout action as Greece recession worsens

Feb 14, 2012, 16:31 GMT

Athens - The European Union's top economic official on Tuesday called for rapid approval of a second bailout package for Greece, as figures showed that the recession in the near-bankrupt country had worsened.

Last week, eurozone finance ministers suspended a decision on a 130-billion-euro (171-billion-dollar) rescue package until Athens gave firmer guarantees on meeting the austerity and economic reforms conditions attached to the aid.

EU Economy Commissioner Olli Rehn said a new meeting of the so-called Eurogroup - tentatively scheduled for Wednesday - should cut to the chase and give final approval to the aid for Athens.

'To my mind, it essential that we hold the meeting of the Eurogroup tomorrow, in order to finalize the package ... once all the conditions have been met by the Greek government and parties,' Rehn said at the European Parliament in Strasbourg, France.

'It is really in the interests of everybody now in Greece and in Europe to make this work and avoid a disorderly default of Greece, which would have devastating consequences,' he added, citing 'negative ramifications for the European economy overall.'

Greece needs the money by March 20, when it will have to meet a 14.5-billion-euro bond repayment.

But preparations for a parallel 100-billion-euro debt write-off deal, which is also part of the aid package for Greece, need to be started this week, if the entire bailout is to be ready in time.

In Berlin, top officials from the Organization for Economic Cooperation and Development (OECD) also urged a quick solution.

The agency's secretary-general, Angel Gurria, said there had been enough debate on terms for private lenders to slash Greece's debt load and that all the elements were now on the table.

Gurria noted that the side effects of the extended period of uncertainty over Greece had caused considerable costs elsewhere, including in terms of lost employment and growth.

However, the Financial Times had reported earlier that Germany was not yet fully convinced by Greek guarantees and may be prepared to give only partial approval to the new bailout on Wednesday, postponing final decisions to another Eurogroup on February 20.

In a sign of hardening German attitudes, a poll of 300 executives in the countries found that 57 per cent of them wanted to eject Greece from the eurozone, Manager Magazin reported in Berlin.

Amid violent street protests, the Greek parliament approved late on Sunday a 3-billion-euro austerity package that was a precondition for more foreign aid.

In addition, Greeks have been asked to find other ways of filling a 325-million-euro budget gap after pension cuts were rejected, and provide written guarantees that a new government will stick to the bailout conditions following elections in April.

A government spokesman in Athens said the country would provide eurozone partners with all the reassurances they were looking for.

Meanwhile, the country's statistical agency said Greece remained stuck in a deep recession in the fourth quarter, highlighting the effects harsh austerity reforms were having on the economy.

Gross domestic product (GDP) contracted by 7 per cent, Elstat said. The contraction followed a 5-per-cent decline in the previous quarter.

Greece, currently in its fifth year of recession, has been relying on rescue loans from the EU and the International Monetary Fund (IMF) since 2010.