Eurogroup chief expects Greek bailout approval on Monday

Feb 15, 2012, 20:13 GMT

Athens/Brussels - Greece has finally delivered the necessary assurances for a new bailout, the chief of the Eurogroup panel of eurozone finance ministers said, adding that he expected the aid to be approved Monday.

Until Wednesday, Greece had fulfilled only one of three conditions set by the Eurogroup for a 130-billion-euro (171-billion-dollar) aid package: Approval by parliament on Sunday of a 3-billion-euro austerity and economic reform package.

In a statement late Wednesday, Eurogroup president and Luxembourg Prime Minister Jean-Claude Juncker said Athens had explained how it intended to close a 325-million-euro budget gap and provided 'strong assurances' from political leaders that they would stick to the bailout terms.

'On the basis of the elements that are currently on the table and the above-mentioned additional input, I am confident that the Eurogroup will be able to take all the necessary decisions on Monday,' Juncker said.

His remarks came after a Eurogroup teleconference that lasted more than three hours.

Greek Finance Minister Evangelos Venizelos said on Greek television that most of the issues had been resolved in the talks, leaving only some 'technical' matters to be clarified.

EU officials were particularly anxious to get written guarantees from Conservative leader Antonis Samaras, who is favoured to become prime minister after elections expected in April.

In a letter leaked to the press, Samaras indicated that he would stick to deficit-reduction targets but warned that 'policy modifications might be required to guarantee the full programme's implementation.'

Earlier, Amadeu Altafaj, spokesman for EU Economy Commissioner Olli Rehn, said that time was running out to approve the bailout by March 20, when Greece faces a 14.5-billion-euro bond repayment.

He would not be drawn on speculation that the Eurogroup this week could at least launch preparations for a parallel 100-billion-euro debt write-off deal, which is also part of the aid package.

Until now, there were expectations that aid needed to be approved by this week to allow for the legal procedures linked to the bond-swap deal to be concluded in time, and for countries such as Germany to secure parliamentary approval for the assistance.

Rainer Bruederle from the German Free Democrats, Chancellor Angela Merkel's junior coalition partner, suggested that Greek payments could be made in instalments, depending on Athens' progress in reducing its deficit.

In a sign that German requests for tough pre-conditions were being heeded, Juncker said: 'Further considerations are necessary regarding the specific mechanisms to strengthen the surveillance of programme implementation and to ensure that priority is given to debt servicing.'

In Berlin, Merkel's spokesman Steffen Seibert denied a Financial Times report indicating that Germany, the Netherlands and Finland - three eurozone countries that have retained top-notch AAA credit ratings - had lost faith in Greece and were considering letting it default.

'I can clearly say on behalf of the federal government that these rumours are false. There has been no such decision by Germany,' he said.

Italian Prime Minister Mario Monti said Greece was 'probably' being treated with 'excessive' harshness, but this was payback for 'Greek policies (which) for many years ... have been a perfect catalogue of worst practices.'

These included 'corruption, nepotism, lack of competition, irregular public tenders, tax evasion,' as well as the falsification of national statistics to hide debt from the EU, Monti said during a visit to the European Parliament in Strasbourg, France.

Belgian economist Paul De Grauwe, an advisor to European Commission President Jose Manuel Barroso, posted on Twitter that the 'Greek drama (was) not only due to Greek corruption (but) also (to) merciless intransigence of European creditor countries.

'I am ashamed to live in Europe.'

In Athens, Venizelos said that President Karolos Papoulias was giving up his salary to contribute to belt-tightening efforts.

Letting go of Greece carries the risk of a contagion effect to other vulnerable eurozone economies, some analysts warn. But this week Spain, Italy and Portugal successfully completed bond auctions, despite markets being aware of the threat for Greece.