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EU delays Greece bailout decision


This news story was published on February 15, 2012.
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By Alvise Armellini and Christine Pirovolakis –

ATHENS, Greece — Greece was once again left hanging on Tuesday after eurozone finance ministers postponed for a second time the approval of a new rescue package, warning Athens that it had not yet convinced them it would respect bailout terms.

Eurozone finance ministers were expected to approve about $170 billion in aid at a special meeting in Brussels on Wednesday — after having put off the decision last week.

But Luxembourg Prime Minister Jean-Claude Juncker, who chairs the so-called Eurogroup panel, said the meeting had been called off and would be replaced by a conference call to discuss “outstanding issues.”

Juncker said he had “not yet” received “the required political assurances from the leaders of the Greek coalition parties” that they would stick to the bailout terms after elections in April.

Greek explanations on how to fill a “fiscal gap” of about $525 million — another prerequisite for the bailout — were also missing, the Eurogroup president said.

So far, Greece has only fulfilled one of three Eurogroup conditions set last week: the approval by the parliament on Sunday of a $3.9 billion austerity package, despite political tensions and violent street protests.

But Juncker’s move indicated that the Eurogroup was willing to keep Athens on the brink of bankruptcy in order to force compliance with all the bailout terms.

Greece needs the money from the EU and the International Monetary Fund by March 20, when it will have to meet a $19 billion bond repayment.

But preparations for a parallel $130 billion debt write-off deal, which is also part of the aid package, need to be started this week, if the entire bailout is to be ready in time, analysts said.

While a final decision on the bailout is now expected at the Eurogroup meeting on Monday (Feb. 20), Wednesday’s teleconference could at least start the necessary technical work on the bond swap deal.

The Financial Times suggested such a scenario earlier Tuesday, indicating that Germany was not yet fully convinced by Greek guarantees and was prepared to give only partial approval to the new bailout.

EU Economy Commissioner Olli Rehn pleaded for a quick decision.

“To my mind, it is 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 interest 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.”

Officials from the Organization for Economic Cooperation and Development echoed calls for a quick solution.

The agency’s secretary-general, Angel 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.

In Athens, the coalition government of Prime Minister Lucas Papademos was holding a meeting when Juncker made the announcement.

Earlier, the Greek statistical agency highlighted the effects harsh austerity reforms were having on the country’s economy.

Gross domestic product contracted by 7 percent year-on-year in the fourth quarter of 2011, Elstat said. The contraction followed a 5 percent decline in the previous quarter.

Greece, in its fifth year of recession, has been relying on rescue loans from the EU and the IMF since 2010.

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