BRUSSELS – Eurozone finance ministers meet in Brussels on Monday with time running out if they are to close a new 230-billion-euro (US$300 billion) bailout package for Greece and avert a chaotic default.
After several false starts during weeks of difficult negotiations, the ministers are scheduled to start meeting at the EU headquarters from 3:30pm (1430 GMT), bidding to greenlight terms on an exchange of bonds held by private investors, the launch of which is pencilled in for Wednesday.
They hope this key step can quell mounting suggestions that Athens could be pushed out of the common currency area.
Designed to write off 100 billion euros of Greek sovereign debt, new IOUs would be issued in return for giving up rights on old bonds that have already lost market value.
Fellow eurozone governments would also inject another 130 billion euros in sweeteners for Greek banks, guarantees covering the weeks-long legal bond-swap window and eventual cash loans to the government in Athens.
But full delivery, as well as IMF assistance, will be contingent on EU-ordered spending cuts and reforms bearing fruit.
For the caretaker Greek government led by Lucas Papademos, financial aid is needed to meet bond repayments of 14.5 billion euros due March 20.
Papademos flew into Brussels late on Sunday for 11th-hour talks before attending Monday's Eurogroup.
In Washington, Treasury Secretary Timothy Geithner said the emerging deal was "deserving of support of the international community and the IMF".
The Group of 20 major economies will meet later this week in Mexico seeking to boost IMF lending resources.
After weeks of what officials said was "deliberate pressure" to get the ruling class in Athens to change its economic mindset, the new bailout has been likened to the aid equivalent of a hospital drip.
Germany and The Netherlands still need to get the second bailout past sceptical parliaments.
A small army of European Union officials is building up in Athens to make sure Greece delivers on pledges including a 22 per cent reduction in the country's minimum wage and a 12-per cent cut to pensions of more than 1,300 euros a month.
EU partners see Greece as the victim of chronic financial mismanagement by dynastic political forces – what Italian Prime Minister Mario Monti last week called a "perfect catalogue" of errors.
But the Italian government said on Friday that German Chancellor Angela Merkel, Monti and Papademos were "confident that a deal can be reached" on Monday.
Both Italy, with national debts nearly four times greater than Greece's at 1.3 trillion euros, and Spain, where hundreds of thousands of anti-austerity protesters took to the streets on Sunday, risk renewed financial-market contagion if the deal breaks down.
Parking the Greek problem to one side would allow eurozone leaders to focus on building a financial firewall for the currency as a whole at a March 2 euro summit.
After fresh protests in Athens too, the sense Greece is effectively being placed under wardenship remains sensitive, ahead of a general election in April.
But eurozone partners say surveillance of day-to-day management on the ground is critical after the failure of an initial 110-billion-euro EU-IMF rescue package approved nearly two years ago.
On top of 3.2 billion euros in the latest spending cuts, Greece also agreed to open an "escrow" account, which would ring-fence monies due to be repaid to governmental creditors, with just enough "incentive", as one source said, to encourage taxation reform and privatisations.
Discussions among tight-lipped officials were taking place in Brussels in the small hours of Monday morning.
With debt reduction targets having veered off course and Greece now in a fifth year of recession, a senior official said there was a 5.5-billion euro hole in the headline sums first agreed in October.
Remedial ideas include lowering the interest on past eurozone loans to Greece as well as bond swaps for national central banks and by extension the European Central Bank, although each brings its own problems. -- AFP