BRUSSELS: 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 an imminent bankruptcy.
As the ministers met, officials were struggling to make the numbers add up. EU sources said they had to find a further 6 billion euros, via various options, to make the financing work, and private investors might have to take bigger losses.
A report prepared for ministers by EU, European Central Bank and IMF experts, obtained exclusively by Reuters, said Greece would need extra relief to cut its debts to the official target of 120 percent of GDP by 2020.
If it did not follow through on structural economic reforms and savings, its debt could hit 160 percent by that date.
"Given the risks, the Greek program may thus remain accident-prone, with questions about sustainability hanging over it," the 9-page confidential report said.
The biggest additional contribution to debt reduction could come from the European Central Bank and national central banks, the debt sustainability report showed.
If the ECB were to forego profits on its Greek holdings, that would cut Athens' debt by 5.5 percentage points of GDP. National central banks could add another 3.5 percent by restructuring bonds held in their investment portfolios in the same way Greece's private creditors will be required to.
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 creditors, said 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.
An agreement will enable Greece to launch a bond swap with private investors to help reduce and restructure Athens' vast debts, put it on a more stable financial footing and keep it inside the 17-country euro zone.
A Greek finance ministry source said last-minute negotiations were continuing with bank creditors on possible higher writedowns to help plug the funding gap. (Reuters)
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 an imminent bankruptcy.
As the ministers met, officials were struggling to make the numbers add up. EU sources said they had to find a further 6 billion euros, via various options, to make the financing work, and private investors might have to take bigger losses.
A report prepared for ministers by EU, European Central Bank and IMF experts, obtained exclusively by Reuters, said Greece would need extra relief to cut its debts to the official target of 120 percent of GDP by 2020.
If it did not follow through on structural economic reforms and savings, its debt could hit 160 percent by that date.
"Given the risks, the Greek program may thus remain accident-prone, with questions about sustainability hanging over it," the 9-page confidential report said.
The biggest additional contribution to debt reduction could come from the European Central Bank and national central banks, the debt sustainability report showed.
If the ECB were to forego profits on its Greek holdings, that would cut Athens' debt by 5.5 percentage points of GDP. National central banks could add another 3.5 percent by restructuring bonds held in their investment portfolios in the same way Greece's private creditors will be required to.
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 creditors, said 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.
An agreement will enable Greece to launch a bond swap with private investors to help reduce and restructure Athens' vast debts, put it on a more stable financial footing and keep it inside the 17-country euro zone.
A Greek finance ministry source said last-minute negotiations were continuing with bank creditors on possible higher writedowns to help plug the funding gap. (Reuters)
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