Eurozone finance ministers yesterday refused to give their immediate backing to a second bailout for Greece despite a last-minute deal in Athens on austerity measures demanded by creditors.
After rival Greek parties agreed a fresh round of deep cuts, triggering another general strike in Greece, Luxembourg Prime Minister Jean-Claude Juncker said the Eurogroup of finance ministers may only decide on the rescue next week.
The ministers huddled in Brussels to review the deal reached in Athens aimed at unlocking a bailout package worth €130 billion and prevent a devastating default.
Greek Finance Minister Evangelos Venizelos urged his counterparts to endorse the debt rescue after political leaders in Athens agreed on a new round of austerity.
But German Finance Minister Wolfgang Schaeuble warned that the purpose of talks would be “to make clear to Greece and the partners in the negotiations what are the conditions for a second agreement.”
Four months after European Union leaders agreed to mount a second bailout, provided private sector creditors first agreed a massive write-down of their holdings, Mr Juncker said there were simply too many “points to clear up.”
But “if it’s not tonight, it will be done next week,” Mr Juncker said, noting “enormous progress” on various fronts.
He said ministers had to “examine in detail the different strands on the table.”
“After a long and tough period of negotiation, we finally have a staff level agreement with the troika for a new, strong and credible programme,” Mr Venizelos said, referring to the team of EU, IMF and European Central Bank auditors who negotiated with the Greek government.
“We now need the political endorsement of the Eurogroup for the final step,” Mr Venizelos added.
He said a deal had also been agreed on the “basic parameters” of a bond swap with private creditors, aimed at slashing €100 billion from Greece’s €350-billion overall debts.
As they spoke, some 8,000 protesters had gathered on the streets of Athens on the eve of a 48-hour strike over what unions called “barbaric” wage and pension cuts.
Greek press reports said the monthly minimum wage would fall by 22 per cent, to some €586 before taxes, paid 14 times a year.
Greece’s debts amount to 160 per cent of its gross domestic product, but its international backers are demanding that this be brought down to a maximum of 120 per cent in 2020.
Some governments have said they will not pay a cent more than what was agreed in October, hence the pressure on Greece to squeeze out more savings from its recession-battered coffers.
Only then would the EU and the IMF hand over a loan package including sweeteners for Greece’s ravaged banks.
The bond exchange though will take several weeks to perform, raising concerns whether it can be completed before Greece faces €14.5 billion in payments due on March 20.
IMF managing director Christine Lagarde hailed what she said was “clearly some very encouraging news coming out of Athens.”
However, she also cautioned: “There is still more to do.”
Greece faces elections in April to replace Prime Minister Lucas Papademos’ caretaker government.
Some of its eurozone partners, such as the Netherlands, stressed that they also have to put any package to their parliaments.