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Eurozone delays crucial Greek bailout decision

Update: February, 15/2012 - 11:54

BRUSSELS – Eurozone finance ministers put a new Greek bailout on hold on Tuesday after Athens failed to meet conditions demanded by lenders in return for a rescue package it desperately needs to avoid default.

The eurozone had demanded that Greece's finance minister come to Brussels on Wednesday with an extra 325 million euros in budget cuts and written pledges from politicians that they will implement EU-ordered austerity measures.

But Luxembourg Prime Minister Jean-Claude Juncker, head of the group of eurozone finance ministers, decided to switch the meeting to a conference call instead and prepare for previously scheduled talks in Brussels on Monday.

"I did not yet receive the required political assurances from the leaders of the Greek coalition parties on the implementation of the programme," Juncker said in a statement.

He also said "further technical work" was needed between Greece and EU and IMF auditors "in a number of areas," including finding the extra 325 million euros of savings and finishing an analysis of the sustainability of Greece's debt.

The eurozone wants to ensure that the deal will drastically reduce Greece's debt burden, from 160 per cent of gross domestic product to 120 per cent in 2020.

Greece desperately needs the 230-billion-euro (US$303-billion) rescue package – 130 billion euros in fresh loans and a 100-billion-euro write down on privately-held bonds – to avoid defaulting on debt owed on March 20.

The enormous problems confronting Greece were illustrated by new data showing that the economy, in recession for a fifth year, shrank by 7.0 per cent in the fourth quarter of 2011 compared with the same period a year earlier.

The Greek parliament approved 3.2 billion euros in cuts on Sunday despite protests and riots in the streets of Athens, as Greek workers were hit by a 22-per cent reduction of the minimum wage.

But eurozone partners, who no longer trust Athens after the country failed to live up to past promises, want a commitment to austerity in writing from politicians who face an election in April.

Dutch Finance Minister Jan Kees de Jager had warned earlier that chances the Eurogroup would give final approval to the rescue were "low."

"The (Greeks) must first do their homework better," he told RTLZ television, adding that the Dutch wanted to examine the consequences of the package on growth and debt before voting on it.

EU Economic Affairs Commissioner Olli Rehn had voiced hope that a decision would be made "soon" but he renewed calls for Greek politicians to fulfil their commitments.

"I can understand the pain and turmoil in Greece, but at the same time this is the framework that has been decided by the euro area member states together with the IMF, and we work on the basis of this framework," Rehn said.

"It is really in the interest of everybody now in Greece and in Europe to make this work and avoid a disorderly default of Greece, which would have devastating consequences especially to the less well-off members of Greek society and negative ramifications to the European economy overall."

The coalition cabinet led by Prime Minister Lucas Papademos was holding a meeting on Tuesday to find the extra 325 million euros. afp

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