As reported by Luke Baker and Jan Strupczewski of Reuters, Euro zone finance ministers inched towards approving a second bailout for debt-laden Greece on Monday that would resolve Athens’ immediate repayment needs but seems unlikely to revive the nation’s shattered economy.
Agreement on a 130-billion-euro rescue package on strict conditions would draw a line under months of uncertainty that has shaken the currency bloc, and avert imminent bankrupcty.
As the ministers met, officials were struggling to make the numbers add up. EU sources said they had to cut a further 6 billion euros, via various means, to make the financing work, and private investors might have to take bigger losses than the planned 50 percent nominal writedown on their bonds.
Diplomats and economists say a deal may only delay a deeper default by a few months. A turnaround could take as much as a decade, a bleak prospect that brought thousands of Greeks onto the streets to protest against austerity measures on Sunday.
French Finance Minister Francois Baroin said all the elements were in place to reach an agreement and Greek Finance Minister Evangelos Venizelos said he expected a deal. But the talks were expected to run late into the night.
“We expect today the long period of uncertainty – which was in the interest of neither the Greek economy nor the euro zone as a whole – to end,” Venizelos said in a statement.
Dutch Finance Minister Jan Kees de Jager, the most outspoken of Greece’s northern creditors, insisted that the Netherlands could not approve the rescue package until Greece had met all its obligations. But the chairman of the Eurogroup, Jean-Claude Juncker, said Athens had met all the prior conditions demanded of it.
Finland, another stern creditor, signed a side-deal with Greece for Greek banks to provide collateral in cash and highly rated assets in return for Finnish loan guarantees, removing one long-running obstacle.
Euro zone ministers need to agree new measures to make the financing work, given the ever-worsening state of the Greek economy. That may involve lower interest rates on official loans and an indirect contribution from the European Central Bank and euro zone national central banks.