Hopes Rise For Greek Deal, But Anger Grows In Eurozone

(EurActiv) — Optimism is growing that Greece has finally done enough to secure a second bailout after it set out extra budget savings, but the moves failed to ease tensions with EU paymaster Germany.

Time is running out for Greece to seal the €130-billion rescue and avoid bankruptcy, but Greek officials hope eurozone finance ministers will sign the deal off on Monday – a month before Athens needs the money to make €14.5 billion of debt repayments.

The optimism followed acrimony between Athens and northern states in the 17-member currency union, led by Germany, and came only after a proposal to withhold part of the bailout until after Greek elections expected in April was dropped.

“We are almost there,” one eurozone official said, expressing hope the deal could be done when ministers of the Eurogroup meet in Brussels.

“Unless someone really comes up with an idea to undermine the whole deal, it should be approved on Monday,” he said.

In a further sign of an emerging agreement, eurozone sources said national central banks in the currency bloc would exchange holdings of Greek bonds this weekend in the run-up to a private-sector debt deal to avoid taking forced losses.

With a go-ahead from the Eurogroup ministers, Greece can formally launch a debt restructuring offer to its private creditors which aims to halve the face value of what Greece owes the investors, slashing its debts by €100 billion.

“There is no certainty but there is cautious optimism,” Antonis Samaras, leader of Greece’s conservative New Democracy party and the favourite to win the elections, told reporters.

“Greece has done what it had to do,” said Samaras, whose party is one of the two remaining in the coalition of technocrat Prime Minister Lucas Papademos.

Anger aimed at Schäuble

Greek anger has shifted in recent days from German Chancellor Angela Merkel to her finance minister, Wolfgang Schäuble, who in Greek eyes appears to have strayed from economic matters into the political, and even electoral process.

On Wednesday Schäuble noted Italian parties had given technocrat Prime Minister Mario Monti a year to push through reforms.

In Athens those comments were interpreted as a suggestion to delay the Greek elections to allow Papademos – who has been in power only since November – more time to implement promised budget cuts and reforms.

This brought a tart response from government spokesman Pantelis Kapsis. “I have nothing to say in response to Mr Schäuble – it is absolutely up to Greece when to hold elections,” he told reporters.

Schäuble has likened Greece to a “a bottomless pit” and expressed doubt as to whether Athens would stick to austerity promises adopted by parliament on Monday as rioters torched and looted buildings across the capital.

Kapsis confirmed that Athens expected to win approval from the Eurogroup on Monday for the debt swap deal, under which the real value of bonds held by banks and insurers will fall by about 70%.

Athens has provoked rising frustration among some eurozone members at what they see as a trend of Greek political leaders doing the minimum possible at the last moment since the crisis began in 2009. Critics say exactly the same applies to the eurozone’s response over the last two years.

Greek government sources said Athens had agreed with the EU and the IMF on how to fill a €325 million hole in a set of €3.3 billion in budget cuts adopted by parliament on Monday.

Two sources said €100 million would come from defence cuts, about €90 million by bringing forward some public sector wage reductions and €135 million would be taken from the health, labour and interior ministries.

‘Sheer blackmail’

Some points remain unresolved. Kapsis said the issue of an escrow account to ringfence funds for debt payments had not been agreed, while a German coalition source said more work was needed on how to monitor Greece’s efforts to cut spending.

Eurozone finance ministers must also consider on Monday a report by the European Commission, the European Central Bank and the International Monetary Fund which predicts Greek debt will be around 129% of GDP in 2020, well above a target of 120% set in October.

Several officials have said a target of 125% would be acceptable to most eurozone members – and possibly also to the IMF – but measures will be needed to get it somewhat lower.

Ideas include the eurozone cutting the interest rate on its existing bilateral loans to Greece; increasing its current offer of €130 billion of government financing; and asking private investors to agree to bigger losses.

A further option is for the ECB to forego profits on Greek bonds it holds in its portfolio and to re-sell them to the eurozone’s bailout fund, the European Financial Stability Facility (EFSF), at the same discount it bought them on the market.

Earlier, faced with calls for closer scrutiny of Greece’s implementation of the deal, one Greek cabinet member accused the European Union of “sheer blackmail”.

“Any other intervention, any new demands by our lenders, will mean they are mocking the country,” Public Order Minister and former EU commissioner Christos Papoutsis said.

“Some in Europe forget that behind the numbers are people,” Papoutsis said. Union leaders called for a new rally on Sunday “to answer all those who want Greece under German occupation”.