Greece bailout bid 'makes progress'

Feb 15 2012

Greece has made progress convincing the rest of the eurozone that it should get a 130 billion euro (£108 billion) bailout - but the country's austerity measures will need tighter surveillance, the chairman of the eurozone's finance ministers said.

Following a three-and-a-half hour conference call between the finance chiefs of the 17 countries that use the euro, the ministers hailed the strong assurances that the country had found a further 325 million euro (£270 million) in cuts on top of austerity measures already agreed.

They also welcomed written commitments from the leaders of the two Greek parties that make up the coalition government to implement promised cuts and reforms even after elections expected in April.

In Athens, finance minister Evangelos Venizelos said a combination of the written commitments, the passage of a new austerity Bill in Parliament this week with a two-thirds majority and legislation regarding labour reforms were "a credible response to all those in Europe who doubt our ability to implement the programme and to continue its implementation after the coming elections".

However, in a sign of the deep distrust that has built up - especially among rich euro nations such as Germany, the Netherlands and Finland - Jean-Claude Juncker, the prime minister of Luxembourg who also chairs the finance ministers' meetings, said better surveillance mechanisms had to be set up before new aid could be released.

"Further considerations are necessary regarding the specific mechanisms to strengthen the surveillance of programme implementation and to ensure that priority is given to debt servicing," Mr Juncker said.

The statement appeared to be a reference to a Franco-German proposal to set up an account, separate from Greece's general budget, that would be dedicated to paying off Greece's massive debt. It was unclear whether this account would only manage the bailout money or whether government revenue could also be funnelled into it.

Such an account would give the eurozone more control over what Greece does with its money, after the country has repeatedly missed budget, reform and privatisation targets over the past two years. However, it could also be seen as an unprecedented interference into the fiscal affairs of a sovereign state.

Finance ministers held their conference call amid doubts in some countries over whether the 130 billion euro package of rescue loans, which comes on top of a 110 billion euro (£91 billion) rescue granted in May 2010, can ultimately save recession-hit Greece.

Yet, despite rumours that the bailout could be delayed until after the elections, Mr Juncker said he expected the finance ministers "to be able to take all the necessary decisions" at their next meeting on Monday.