UPDATE 6-Greece says has cleared hurdles to bailout

Wed Feb 15, 2012 4:14pm EST

* Conservative leader Samaras signs austerity commitment

* Venizelos says Greeks have found 325 mln euros extra cuts

* Hopes for bailout deal to be clinched on Monday

* EU studies delay of parts of bailout - EU sources

By Dina Kyriakidou and Lefteris Papadimas

ATHENS, Feb 15 (Reuters) - Greek party leaders have met the final two demands set by the country's international lenders to seal a bailout, paving the way for a deal and an agreement to ease its debt burden to be announced on Monday, Finance Minister Evangelos Venizelos said.

Venizelos told reporters late on Wednesday that the cabinet had decided how to plug a 325 million euro gap in the 3.3 billion euros of extra budget savings this year which the EU and IMF are demanding in return for the 130 billion euro rescue.

Likewise he noted that the leaders of both parties in the government of Prime Minister Lucas Papademos had given written undertakings to implement the austerity measures, which provoked serious rioting on the streets of Athens last Sunday.

Exasperated euro zone finance ministers in the Eurogroup had demanded both issues be settled before making a final decision on the bailout, Greece's second since 2010.

With mistrust of Athens high, EU sources told Reuters euro zone officials had considered whether it was possible to delay part or all of the rescue deal while still avoiding a disorderly default.

Greece needs the funds to avoid bankruptcy when 14.5 billion euros of debt repayments fall due on March 20.

"The big issue of the 325 million euros has been finalised and this helped the discussion," Venizelos said following a lengthy telephone conference call with his euro zone peers.

The Eurogroup had been due to meet in Brussels but its Chairman Jean-Claude Juncker scaled this down to a teleconference, complaining that Greek political leaders had failed to provide written commitments or plug the savings gap.

Greek party leaders have a reputation for working right up to deadlines, or beyond them, raising tensions with the Eurogroup which fears that they will avoid implementing the austerity package in full after elections expected in April.

However, conservative leader Antonis Samaras, the front runner to become the next prime minister, provided his written undertaking to the EU and IMF on Wednesday shortly before the Eurogroup conference call. Socialist leader George Papandreou wrote a similar letter.

Venizelos said he hoped euro zone officials could tie up all the issues before the ministerial Eurogroup meets on Monday, opening the way for a bond swap deal with Greece's private creditors, known as PSI, which will reduce its debt mountain.

"These issues will be prepared at a Euro Working Group meeting on Sunday in Brussels so that, with good faith, the final decision for the approval of the (bailout) programme is taken and the public announcement of the PSI is made on Monday," he said.

Greece had said it must initiate a debt swap deal with private sector bondholders by Friday to meet a March 20 deadline for the 14.5 billion euros in debt repayments. It was hoping to have the euro zone's backing for its second bailout this week. If that backing now comes on Monday, it is possible the debt swap could start in the middle of next week.

FEW DETAILS

After the three-hour conference call among the 17 euro zone ministers, Eurogroup chairman Jean-Claude Juncker issued a statement saying progress had been made, but provided few details.

He said the European Central Bank, IMF and European Commission had completed a report into Greece's debt sustainability - a precondition for approving the bailout - and that he expected the Eurogroup to be able to take the necessary decisions on Athens at the next meeting on Monday.

"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," he said.

"On the basis of the elements that are currently on the table and the above-mentioned additional input, I am confident that the Eurogroup will be able to take all the necessary decisions on Monday 20 February."

Samaras, whose New Democracy party is ahead in the polls, delivered his letter of undertaking earlier on Wednesday.

"If New Democracy wins the next election in Greece, we will remain committed to the programme's objectives, targets and key policies," Samaras wrote.

But he insisted the fast-shrinking Greek economy must also be kickstarted into life and reserved the right to adapt details of the package accordingly - a hedge that could prove a sticking point for increasingly frustrated euro zone partners.

"Prioritising recovery along with the other objectives will only make the programme more effective and the adjustment effort more successful. Therefore ... policy modifications might be required to guarantee the full programme's implementation," he wrote.

STRONG DOUBTS

EU sources said some in the euro zone doubted the commitment of Greece's leaders to austerity, and queried whether it would be enough to bring Greece's debt-to-GDP ratio down from 160 percent now to a target of 120 percent by 2020.

"There are proposals to delay the Greek package or to split it, so that an immediate default is avoided, but not everything is committed to," one official briefed on preparations for the euro zone finance ministers' call told Reuters.

"There is pressure from several countries to hold off until there is a concrete commitment from Greece, which may not come until after they've held elections."

Samaras' belated commitment to honour the austerity plan may have put that plan on the back burner, even if concerns linger.

"With every small piece of news that we get from Athens, the situation is becoming better," said an EU diplomat. Whether it will hold all the way through, we can't know."

After a series of broken promises since Athens was first bailed out in May 2010, trust is in short supply.

"When you look at the internal political discussions in Greece and the opinion polls, then you have to ask who will really guarantee after the elections ... that Greece will stand by what we are now agreeing with Greece," German Finance Minister Wolfgang Schaeuble told SWR2 radio.

Greece's President Karolos Papoulias, who holds a largely ceremonial role, fought back, saying in a speech: "Who is Mr Schaeuble to insult Greece? Who are the Dutch? Who are the Finnish?"

European Central Bank board member Joerg Asmussen said approval by the Eurogroup at regular talks next Monday would allow a sovereign debt swap to be completed in time.

"If the Eurogroup (of euro zone finance ministers) is able to make a positive political decision next Monday, the bond swap with voluntary PSI (private sector involvement) can immediately begin and be completed in time," he told Reuters.

Greece is well on its way to suffering one of the biggest slumps of modern history. Output has contracted 16 percent from its peak in 2008 and the cuts will inevitably make that worse.

Papademos has said that failure to back the bailout would consign Greece to economic catastrophe.

But with many Greeks suffering huge cuts in their living standards and young people burning and wrecking almost 100 Athens buildings in one night on Sunday, some people believe the catastrophe is already under way.

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Comments (4)
Headloser wrote:
Well duh, the Greece people are the ones whom are responible for their problems. They were like drugs addicts in the 1990 to 2008. They gotten blinded so spending so much money, not caring where the money coming from nor how to pay it off.
It came to bite them in their rear end. AND they don’t like it. Too bad you made the mess you clean it up. That simple.
Too bad USA is not far behind too.

Feb 15, 2012 1:54am EST  --  Report as abuse
Greece has found the $325 mn euro add-on to the austerity package? So what. They have provided no details and they have neither legally approved or IMPLEMENTED those additional fiscal “savings”. Come to think of it, they have not yet implemented the other austerity measures that they recently approved. All of this is consistent with their previous lies and delaying tactics.

Why should we believe any of this Greek Trojan Horse garbage? Put them down, like a lame race horse.

Feb 15, 2012 8:13pm EST  --  Report as abuse
breezinthru wrote:
Whether the Eurozone leaders like it or not, Samaras’ hedge should have been anticipated.

Greece’s economy will continue its downward trend if it stays in the Euro and it will crater if it leaves the Euro. The key difference is that if it leaves the Euro, it can eventually rise up from the crater.

The Eurozone would be fools to offer Greece any more money and the Greeks would be even greater fools to accept it.

Feb 15, 2012 10:26pm EST  --  Report as abuse
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