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Eurozone gives Greece ultimatum for new bailout

Update: February, 10/2012 - 11:48

BRUSSELS – Eurozone finance ministers put off a decision on Thursday on a new bailout to save Greece from bankruptcy, giving Athens less than a week to meet three conditions in return for 130 billion euros (US$171 billion) in aid.

The deadline was set after talks in Brussels between Greek Finance Minister Evangelos Venizelos and his 16 eurozone counterparts, who were unmoved by a deal rival Greek politicians struck hours earlier on austerity measures demanded by lenders.

"Despite the important progress achieved over the last days, we did not have yet all necessary elements on the table to take decisions today," Eurogroup chief Jean-Claude Juncker told a news conference.

The eurozone will hold a new meeting next Wednesday if all conditions are met, said Juncker, Luxembourg's prime minister.

Venizelos had urged his counterparts to endorse the debt relief deal, but the ministers first demanded that the Greek parliament approve the austerity measures agreed by the political parties when it convenes on Sunday.

The two other conditions are additional structural spending cuts of 325 million euros for 2012 and a written pledge from coalition leaders that they will implement austerity measures, Juncker said.

"These three elements that I mentioned need to be in place before we can take decisions," he added.

In a backdrop of elections looming in April, Venizelos, a socialist, charged that eurozone ministers had taken into account the refusal of Conservative leader Antonio Samaras to sign a written commitment to the cuts.

With bond payments of 14.5 billion euros due March 20, Venizelos warned that Greece's place in the eurozone was now in the hands of the conservative party.

"It must decide – if they want (Greece) to stay in the eurozone, they have to say so clearly. If they don't, then they have to say that clearly as well," he said.

"The choice is between two decisions – very difficult, and very, very difficult."

In Athens, some 8,000 angry Greeks took to the streets while unions called a 48-hour strike from Friday over what they called "barbaric" wage and pension cuts.

Greek political leaders reached a last-minute deal on Thursday on new austerity measures demanded by international lenders in return of the 130-billion-euro bailout.

In parallel, Greece has negotiated a debt writedown with its private lenders, hoping to slash 100 billion euros from its 350-billion-euro debt mountain. EU economic affairs commissioner Olli Rehn said the writedown was nearly finalised.

But after seeing Greece drag its feet on reforms for the past two years, finance ministers want proof that Athens will follow through on its promises this time.

"All these measures are important to ensure a smooth implementation of the programme," said Juncker, pointing also to the April elections.

Rehn said eurozone partners were also "seriously considering" opening an escrow account for Greece, which would block a portion of state revenues to guarantee the repayment of bailout loans.

The Franco-German proposal is "one possibility for reinforcing surveillance and effectively implementing the programme", he said. – AFP

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