Italy, German, Greek leaders "confident" about agreement

Feb 17, 2012, 13:32 GMT

Eds: Updates vote, protests

Athens/Brussels (dpa) - Italian Premier Mario Monti, German Chancellor Angela Merkel and Greek Prime Minister Lucas Papademos in a three-way telephone conversation on Friday expressed confidence about reaching an agreement on Greece, the Italian Prime Minister's office said.

In discussions that were described as 'detailed and conducted in a constructive spirit - the three participants declared themselves confident that an agreement on Greece can be reached at Monday's Eurogroup summit' in Brussels.

European Union officials in Brussels on Friday also were hopeful that a new bailout for Greece could be approved next week, despite admitting that some key elements of the package were still missing.

Work on the 130-billion-dollar (171-billion-dollar) bailout 'is 90 per cent done,' one EU diplomat said, highlighting that not all the pieces were yet in place.

In Athens, Greek officials at the prime ministers office told dpa that a draft law on fresh cuts to pensions and benefits for large families was set to be tabled in parliament at some point over the weekend.

However, officials said the bill was now 'increasingly unlikely to be passed this weekend,' as initially believed.

The draft law seeks to close a 325-million-euro budget gap - one of the last conditions demanded by international creditors in exchange for bailout loans.

So far, Greece has fully met two of three conditions: Approval by parliament of a 3-billion-euro austerity and economic reform package, and written assurances from political leaders that they would stick to the bailout terms even after elections, expected in April.

The 130-billion-euro figure for the Greek bailout was arrived at in October. Since then, the country's recession has worsened, leaving the European Union and the International Monetary Fund (IMF) scrambling to find more money.

Asked whether that was still an unresolved issue, another EU official in Brussels replied, 'yes.'

One option for the European Central Bank and national eurozone central banks is to forego profits on the Greek bonds they hold in their books. Another one is for the interest rate on EU-IMF loans to be lowered further - although the margin has already been reduced.

Athens needs money by March 20, when it will face a 14.5-billion-euro bond repayment. But there was urgency to approve the bailout because a parallel 100-billion-euro debt write-off deal that is also part of the package would take weeks to be put into practice.

Decisions have been held up by German, Dutch and Finnish insistence on tougher scrutiny on Athens, which over the past two years has failed to deliver on many promised economic reforms.

The mechanisms to put Greece under stronger surveillance are another open issue that will be debated by a preparatory eurozone finance ministry officials' meeting Sunday, the same EU official told reporters.

He confirmed that the German idea - later supported by France - to create a special account to prioritize debt repayments over other types of Greek government spending is expected to be adopted.

He also stressed that Greece has been under special EU tutelage since October. 'We have already dozens of people in key ministries,' and efforts to recruit more people to be sent to Athens are taking place 'every day,' the official said.

Meanwhile, seven German nationals were arrested on Friday following an anti-austerity protest outside the German embassy in central Athens, police said.

The arrests were made after the protesters, hurled eggs at the building.

The protest, involving two dozen people, the majority of them German nationals, took place after Greek President Karolos Papoulias slammed German Finance Minister Wolfgang Schaeuble earlier this week for 'insulting my country.'

Schaeuble has repeatedly criticized Greece, saying it needs to make dramatic reforms, further straining relations between Berlin and Athens.