Greek hopes of winning the final go-ahead for a new €130bn (£108bn) bailout when eurozone finance ministers meet on Monday could be shattered even though Athens has agreed to further bruising savings.
Angela Merkel's chief spokesman said after the German chancellor held a conference call with Mario Monti, Italian premier, and Lucas Papademos, his Greek counterpart, that the three were "confident" a deal would be struck on Monday.
The optimism seeped into global markets with the Dow Jones rising towards 13,000 points in New York and the FTSE 100 inching close to the 6000-mark. But, behind the scenes, sources indicated it could be seriously misplaced.
Amid growing evidence of a significant split between Merkel and her finance minister Wolfgang Schäuble on a new Greek bailout, some officials spoke darkly of Athens being allowed to default within the eurozone by early summer.
A highly confidential report by the so-called troika of senior officials from the European commission, European Central Bank and International Monetary Fund is said to have concluded that even with the €325m extra savings painfully adopted by Athens this week Greek debt will still be 129% of GDP by 2020.
The latest €3.3bn of savings agreed by the Papademos government and the bailout are supposed to deliver a debt-to-GDP ratio of 120% by then – the same as Italy's now. On that basis, sources say, the full bailout cannot be approved.
The German news weekly Der Spiegel reports that a majority of eurogroup finance ministers are readying themselves for a collapse of the latest rescue package on Monday – or, at least, leaving it to a planned EU summit on 1 March to decide.
"Scepticism is especially strong among the AAA-rated states (Germany, Finland, the Netherlands) whether Greece can turn it around," said Maria Fekter, Austrian finance minister. "The threat of a Greek default is not off the table."
Her Dutch counterpart, Jan Kees de Jager, has already admitted that these countries would have voted against granting the €130bn bailout had the 17 eurogroup finance ministers met – as planned – on Wednesday.
He said: "The scenario we're trying to achieve is that Greece complies with all necessary measures and demands made by the international community in order to have a deal on the entire package – without a split." He spoke of unspecified "alternative scenarios" without such a deal.
"We expect the Greeks to rise to their responsibilities," Schäuble's deputy Steffen Kampeter said. "This coming Monday, we will see whether Greece delivers or whether we will be forced to decide on another course of action, one that is not desired."
In Berlin officials rebutted widespread reports of a growing rift between Merkel, who backs Greece staying a member of the euro, and Schäuble.
Francois Fillon, French premier, effectively confirmed divisions within Berlin. But he urged France's allies "not to play with" a Greek default and strongly backed Athens: "The Greeks have promised very important reforms. The Europeans now have to keep their commitments."
In a seemingly endless tussle between stability and solidarity, finance ministers could end up agreeing to the bailout but only in tranches – with the first one, required for Greece to repay €14.5bn of debt by 20 March, held in an escrow account.
This account would be topped up only if Athens did indeed service its debts and implement reforms.
Even this tough compromise could be undermined by a complicated row over the ECB's holdings of Greek bonds.
The eurozone central bank is arguing that these should not be written down in the same way as the 70% "haircuts" to be suffered by private investors. The latter, in turn, are enraged.
guardian.co.uk
Angela Merkel's chief spokesman said after the German chancellor held a conference call with Mario Monti, Italian premier, and Lucas Papademos, his Greek counterpart, that the three were "confident" a deal would be struck on Monday.
The optimism seeped into global markets with the Dow Jones rising towards 13,000 points in New York and the FTSE 100 inching close to the 6000-mark. But, behind the scenes, sources indicated it could be seriously misplaced.
Amid growing evidence of a significant split between Merkel and her finance minister Wolfgang Schäuble on a new Greek bailout, some officials spoke darkly of Athens being allowed to default within the eurozone by early summer.
A highly confidential report by the so-called troika of senior officials from the European commission, European Central Bank and International Monetary Fund is said to have concluded that even with the €325m extra savings painfully adopted by Athens this week Greek debt will still be 129% of GDP by 2020.
The latest €3.3bn of savings agreed by the Papademos government and the bailout are supposed to deliver a debt-to-GDP ratio of 120% by then – the same as Italy's now. On that basis, sources say, the full bailout cannot be approved.
The German news weekly Der Spiegel reports that a majority of eurogroup finance ministers are readying themselves for a collapse of the latest rescue package on Monday – or, at least, leaving it to a planned EU summit on 1 March to decide.
"Scepticism is especially strong among the AAA-rated states (Germany, Finland, the Netherlands) whether Greece can turn it around," said Maria Fekter, Austrian finance minister. "The threat of a Greek default is not off the table."
Her Dutch counterpart, Jan Kees de Jager, has already admitted that these countries would have voted against granting the €130bn bailout had the 17 eurogroup finance ministers met – as planned – on Wednesday.
He said: "The scenario we're trying to achieve is that Greece complies with all necessary measures and demands made by the international community in order to have a deal on the entire package – without a split." He spoke of unspecified "alternative scenarios" without such a deal.
"We expect the Greeks to rise to their responsibilities," Schäuble's deputy Steffen Kampeter said. "This coming Monday, we will see whether Greece delivers or whether we will be forced to decide on another course of action, one that is not desired."
In Berlin officials rebutted widespread reports of a growing rift between Merkel, who backs Greece staying a member of the euro, and Schäuble.
Francois Fillon, French premier, effectively confirmed divisions within Berlin. But he urged France's allies "not to play with" a Greek default and strongly backed Athens: "The Greeks have promised very important reforms. The Europeans now have to keep their commitments."
In a seemingly endless tussle between stability and solidarity, finance ministers could end up agreeing to the bailout but only in tranches – with the first one, required for Greece to repay €14.5bn of debt by 20 March, held in an escrow account.
This account would be topped up only if Athens did indeed service its debts and implement reforms.
Even this tough compromise could be undermined by a complicated row over the ECB's holdings of Greek bonds.
The eurozone central bank is arguing that these should not be written down in the same way as the 70% "haircuts" to be suffered by private investors. The latter, in turn, are enraged.
guardian.co.uk
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