Greek audit report ‘could determine’ EU rescue terms

An EU-IMF fiscal audit of Greece this week could determine if a new debt bailout set up in July will stand as originally agreed, German Chancellor Angela Merkel said yesterday.

“Should we renegotiate or not?” Merkel told Greek state television NET on the sidelines of a meeting with Greek Prime Minister George Papandreou in Berlin on Tuesday.

“Of course we would prefer that the figures remain unchanged but I cannot foretell (the EU-IMF mission report),” she said.

There is strong speculation that Greece will need a more drastic rescue package to shore up its sinking economy than that put forward in July after a May 2010 accord proved inadequate.

In particular, it is argued that Athens will need to cut its massive debt by up to 50 per cent to make it sustainable, forcing holders of its bonds to take a huge loss which could only be made up by state aid.

The current plan foresees private creditors such as banks taking a 21 per cent loss on their holdings of Greek bonds which mature by 2020.

Greece’s Naftemboriki daily yesterday said 90 per cent of private creditors had agreed to sign up to the original write-down programme, meeting a target desired by Athens for weeks.

“(Creditor) participation on bonds maturing by 2020 has reached 90 per cent and it is not excluded that the target could be exceeded,” the daily said, citing a finance ministry source.