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EU tries to keep March deadline for Greek rescue
February 6, 2012 / 6:45 PM / 6 years ago

EU tries to keep March deadline for Greek rescue

BRUSSELS (Reuters) - Euro zone countries are trying to finalize a second Greek rescue package by the start of March to save the country from default despite repeated delays in decision-making by Athens, EU officials said on Monday.

Europe’s policymakers want the EU/IMF aid deal to be nailed down quickly and are frustrated with Greece’s political leaders who on Monday said they needed yet another day to consider the package’s painful conditions.

EU officials have set a timetable to approve the 130 billion euros in aid in early March, around the time of a summit of EU leaders and shortly after the expected completion of a bond swap with Greece’s private creditors.

The timing is tight and delays have already occurred. A meeting of euro zone finance ministers to start technical preparations was expected on Monday, but is now not likely to happen until later this week, depending on when long-delayed decisions are taken in Athens.

That pushes back the preparatory work, including a formal request that must be made to countries to pledge guarantees to the EFSF, the rescue fund that will be used to help Greece. Officials expect all preparations and the execution of the bond swap with creditors to last at least three weeks.

“There’s no time left to get a comprehensive package ready by the next Eurogroup meeting, so essentially the deadline is going to have to be the leaders’ summit on March 1,” one EU diplomat said.

Patience is wearing thin.

“We’re already well beyond deadlines,” Amadeu Altafaj, the European Commission’s spokesman on economic and monetary affairs, told reporters on Monday.

“A whole series of transactions and legal acts need to be approved, and decisions must be taken. The ball is now in Greece’s court.”

A euro zone official said separately that if Greece was going to get the money it needs in time - it has a bond redemption payment of 14.5 billion euros to make on March 20 - it had to act urgently and deliver firm commitments on reform.

That includes signing a memorandum of understanding committing to a range of spending cuts, structural reforms and tax-system adjustments.

Greece has little room for maneuver, but its political leaders, facing elections in April, remain reluctant to commit to the reforms. They will hold another meeting on Tuesday to see if they can break the deadlock.


In terms of the euro zone’s timetable, the starting point is the bond swap, which will involve private creditors exchanging their holdings of Greek government bonds for longer-dated securities with a lower coupon, a move that will reduce Greece’s debt burden by 100 billion euros.

The swap could be launched on February 15 and conclude as early as two weeks later, on the eve of a meeting of EU and euro zone leaders, one source said.

A second measure for delivering financial support to Greece will be a 35 billion euro bond issue by the EFSF, the European Financial Stability Facility, around February 20.

The bonds will be offered as security to the European Central Bank in return for it accepting the bonds of Greek banks as collateral in refinancing operations to keep them afloat when Athen’s debt is briefly downgraded during the bond swap.

Officials also expect Greece to pass legislation on collective action clauses (CACs) - which make it easier to carry out debt restructurings - around February 17, one source said.

In order to close any gap between Greece’s total needs and the 130 billion euro rescue package agreed, some officials also hope the ECB will be prepared to forgo profits it stands to make on Greek bonds, which it bought at a discount. However, that idea is controversial and would require lengthy negotiation.

Reporting By John O'Donnell; Additional reporting by Luke Baker and Jan Strupczewski in Brussels; editing by Anna Willard

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