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Monday, 13 February 2012

EU may not finalise €130bn Greek bail-out on Wednesday

Germany and its eurozone allies signal that they may not be prepared to approve the deal at a finance minsters’ meeting on Wednesday, despite Athens backing new austerity measures and public outrage in Greece.

An extra €325m in budget cuts passed on Sunday look meagre comparably to the mammoth second tranche.  Senior European Union officials said they believed Greece had met the demands of the troika of international creditors – the European Commission, International Monetary Fund, and European Central Bank – after a parliamentary vote on Sunday, including pensions cuts and other concessions.

“The Greeks will have done the necessary prior actions by Wednesday, including the €325m, so all the elements should be on the table,” a senior official said. But other officials said scepticism remained intense in Germany and the Netherlands and a Tuesday meeting of the “euro working group” – finance ministry officials from all 17 eurozone members – would be key to decide whether lenders would approve the deal.
One eurozone official said the group had come up with a list of at least a half-dozen items that Greece must accept before the deal will be moved to finance ministers for final approval on Wednesday.
The items on the list include, according to several officials, proof of the €325m in cuts, clarification on how Greece intends to reduce labour costs 15 per cent, and reassurance that all Greek leaders will back the deal – especially after Antonis Samaras, head of the centre-right New Democracy party and Greece’s presumptive next prime minister, indicated that he may try to renegotiate the pact after April elections.
“The parliamentary vote is important, but it’s not the be all and end all,” said another eurozone official. “Samaras’s explanations are shifty.”
If the German-led group of creditor countries emerges unconvinced, officials said lenders may turn to a plan B, where the bail-out is given “conditional approval” and is reassessed at the next scheduled meeting of eurozone finance ministers next week.
In that case, ministers would only give the go-ahead for a critical part of the new bail-out, a €200bn restructuring of privately held debt which must begin in a matter of days in order to be completed before Greece’s next bond comes due – a €14.5bn redemption on March 20.

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