Eurozone defers decision on 2nd bailout for Greece

Updated: 2012-02-10 11:24


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Eurozone defers decision on 2nd bailout for Greece

Greece's Finance Minister Evangelos Venizelos attends a Eurogroup meeting at the European Union council headquarters in Brussels Feb 9, 2012. [Photo/Agencies]

BRUSSELS - Eurozone finance ministers said late Thursday that the Greek authorities have not done enough to convince international lenders to approve a crucial new bailout package.

"Despite the important progress achieved over the last days, we did not yet have all necessary elements on the table to take decisions today," Eurogroup President Jean-Claude Juncker said at a press conference after a meeting of eurozone finance ministers.

Juncker made the comments hours after Greece's prime minister Lucas Papademos announced in Athens the conclusion of "a general agreement" on the contents of a second bailout program without disclosing details.

Greece urged to do more

Juncker first called upon the Greek parliament to approve on Sunday the policy package agreed between Greece and the "troika," and asked the Greek government to rapidly identify a additional structural expenditure reductions of 325 million euro in 2012 as part of a 3.3-billion-euro (about $4.4 billion) austerity plan.

"We would also need to obtain strong political assurances from the leaders of the coalition parties on the implementation of the programme," the president added.

Due to the failure of the Greek government to implement many of the reforms agreed as part of the first bailout package in May 2010, the "troika" has been insisting major political parties in the Greek government make firm commitment to "painful" structural reforms and austerity measures before signing on the bailout program.

The 130 billion-euro bailout package, offered by the "troika," namely, the International Monetary Fund, the European Commission and the European Central Bank, is crucial for Greece to avoid default or a potential exit from the eurozone on March 20 when 14.5 billion euro of bonds come due.

"These three elements, those I mentioned, need to be in place before we can take decisions. We welcomed the assurances provided by the Greek government that all the necessary elements will be put in place in the coming days," Juncker told reporters.

Speaking on his arrival for the meeting, German Finance Minister Wolfgang Schaeuble told reporters that "We have come very far, but we are still not far enough.And it is good to tell the Greek authorities what the conditions for a second bailout program during the meeting."

The German finance minister also urged Greece to "implement what it has not implemented from the first programme before we can decide on a second."

"My knowledge is that we still haven't got the conditions that were clearly demanded by EU leaders," including reducing Greece's debt-to-GDP ratio to 120 percent by 2020 and limiting the amount of the bailout by 130 billion euros,said Schaeuble.

Stronger monitoring

EU officials also stressed the importance of effective implementation of the bailout program and proposed stronger monitoring measures during the meeting.

"The second Greek programme needs genuine ownership by the Greek political parties and it needs stronger and more effective implementation," Olli Rehn, EU's Economic and Monetary Affairs Commissioner, told the press conference.

"Therefore we will need to further strengthen our capacity on the ground in Athens, both for monitoring and for assistance," added Rehn, who said this was one of the issues the ministers discussed very intensively by the finance ministers.

The European Commission had also received endorsement to reinforce its tools in order to ensure "effective monitoring and reinforced technical assistance," the commissioner said.

He pointed to fighting tax evasion, reforming the tax administration, implementing privatisation and better absorption of structural funds, as areas where monitoring would need to be reinforced.

The finance ministers also discussed a proposal by Germany and France to create an "escrow account" to control some of the bailout fund to make sure that the Greek government would make it a priority to pay its creditors.

"This proposal on an escrow account, or priority of debt service, is being explored by the Commission and the Eurogroup Working Group, and we are considering it seriously, because it is one relevant possibility of enforcing surveillance and ensuring effective implementation of the programme," Rehn said.