* Deal on second Greek bailout seen on Monday
* Reports says Greek debt to reach 129% of GDP in 2020
* Euro ministers to fine-tune bailout parameters
By Jan Strupczewski
BRUSSELS, Feb 16 The euro zone is putting
the finishing touches to a second bailout deal for Greece for
finance ministers' approval on Monday, with the focus on how
Greece can prioritise debt repayment and ways to ensure Athens
implements agreed reforms.
"We are almost there," one euro zone official said. "Unless
someone really comes up with an idea to undermine the whole
deal, it should be approved on Monday."
Officials said proposals floated by some euro zone countries
to postpone talks on some or all of the package until after
Greek elections expected in April, did not gain wider support.
Euro zone finance ministers will also analyse at their
meeting on Monday the implications of a Greek debt
sustainability analysis - a document distributed to ministers
just before a conference call on Wednesday afternoon.
The focus of the debate is how far Greek debt can be reduced
- from its current level of 160 percent of GDP - by 2020.
The analysis, prepared by the European Commission, the
European Central Bank and the International Monetary Fund (IMF),
shows that Greek debt in 2020 would be around 129 percent of
GDP. That compares with a target of 120 percent established in
October by euro zone leaders, officials said.
"The end result ... does not match the parameters of the
October agreement," a second euro zone official said.
Several euro zone officials have said that a target of 125
percent of Greek debt in 2020 would still be acceptable to most
euro zone officials - and possibly also to the IMF - because
there were so many variables that could affect the outcome.
The analysis lists measures that could get the debt ratio
lower than 129 percent, and the finance ministers will discuss
these on Monday, officials said.
Ideas include the euro zone cutting the interest on its
existing bilateral loans to Greece; increasing its current offer
of 130 billion euros of government financing; and asking private
investors to agree to bigger losses.
German Finance Minister Wolfgang Schaeuble told German
lawmakers last week that government participation in the second
package may have to rise to 136 billion euros from 130 billion.
A further option is for the European Central Bank to forego
profits on Greek bonds it holds in its portfolio and to re-sell
them to euro zone's bailout fund, the European Financial
Stability Facility (EFSF), at the same discount it bought them
on the market.
"You don't have to do them all," the second euro zone
official said. "It is enough to do some of them to get very
close to the October parameters ... This was already discussed
for half the conference call on Wednesday and will be discussed
again by civil servants before the Eurogroup on Monday, but some
things will be left open for the ministers," the official said.
Time is running out for a decision on the package. Without a
go-ahead from the euro zone finance ministers, Greece cannot
formally launch a debt restructuring offer to private investors.
This aims to halve in nominal terms what Greece owes to
investors, slashing its debts by 100 billion euros.
Greece is due to pay back 14.5 billion euros in maturing
bonds on March 20. If it does not have a deal in place before
that, it will default on those bonds.
If euro zone finance ministers approve the second package on
Monday, Greece will be able to launch the offer on Tuesday or
Wednesday, officials said, giving much less than the usual 3-4
weeks for investors to respond.
The offer would then close on Thursday, March 8, be
processed on Friday, March 9 and Greece could then exchange its
old bonds for new ones over the following weekend, the second
euro zone official said.
Euro zone ministers also want Greece to ensure that it will
service its debt as a matter of priority. The European
Commission is preparing for Monday a proposal to set up an
escrow account for Greek to facilitate the debt servicing.
A special account would make sure that Greek government
revenues would go to service the debt rather than risk being
taken up by general expenditure.
Officials said that Greece had been open to this proposal on
the Wednesday Eurogroup conference call.
The Commission will also prepare a proposal to beef up its
monitoring capacity of the Greek economy to make sure that
reforms agreed to under the bailout are implemented.
This could involve increasing the number of staff from the
Commission as well as the permanent stationing in Athens of
experts from euro zone countries, one official said.