EU ministers wrangle over new bail-out for Greece

Germany, France and talks chairman Jean-Claude Juncker all indicated a deal was close after months of wrangling over whether Athens qualifies for a second massive financial rescue package from the European Union and International Monetary Fund .

The struggling Greek economy received €110bn (£91bn) in 2010, but it was not enough to lift Greece out of crisis.

Now, with strict austerity strings attached, another €130bn lifeline looks set to get the go-ahead within weeks of an impending Greek debt default.

German finance minister Wolfgang Schauble – who last week indicted a willingness to let Greece leave the eurozone – said that he was now “confident” of a deal on a new aid programme.

And his French counterpart, François Baroin, said all necessary elements of an accord were in place.

Mr Juncker, Luxembourg’s prime minister and chairman of the eurozone nations, said he hoped last night’s meeting would be the “final consultations” before approving the deal.

Greek finance minister Evan-gelos Venizelos said his government had “fulfilled all the requirements for the approval of the new programme”, but acknowledged: “Until the very last moment, the negotiation carries on. Technical problems are being discussed, individual parameters are being examined and preferences or priorities of institutional partners or member-states are affecting the mood of the talks.”

A Greek austerity package of severe pay, pensions and jobs cuts as a bail-out condition is in place, and the Greek government has found €325 million of extra, immediate savings in this year’s national budget.

Written pledges from most key Greek political parties that the austerity measures will be honoured even after a change of government are also in place.

Last night, however, the ministers were still arguing over pressure from the Netherlands for some “permanent” EU, IMF and European Central Bank involvement in future Greek tax and spending plans, to ensure that the austerity plan does not waiver.

Ministers were also still trying to juggle the financial figures to get Greece closer to a target of reducing its debt level – a huge 160 per cent of Greece’s national wealth – to a more sustainable level of 120 per cent of GDP by 2020.

With the debt reduction target date eight years away, some officials said it would be impossible to work out an accurate calculation now for the Greek economy to guarantee delivery of a 120 per cent goal by 2020.

If a deal goes through, Greece’s private creditors would take a loss of as much as 70 per cent on what they are owed by Athens – a sacrificial “haircut” that would amount to a debt write-off worth €100bn to help the Greek economy get back on its feet.

Despite growing threats of some frustrated member states being ready to accept an “orderly default” from Greece, all signs last night were of a major effort to clinch a deal to keep Greece inside the euro, as much to avoid the political, as well as economic, fallout from the loss of a eurozone member.

Failure last night to complete a deal would still not be the end of the line: an EU leaders’ summit is scheduled next week, and Greece has until 20 March to meet its next – relatively modest – debt repayment of €14.5bn.

But Mr Juncker indicated that another delay would be too close for comfort: “I am of the opinion that today we have to deliver, because we don’t have any more time.”

Unusually, Greek prime minister Lucas Papademos was on hand at an EU finance ministers’ meeting, ready to tackle any final obstacles to a deal which would get Greece back on economic track – albeit in the face of continuing violent public protests at the scale of belt-tightening Greek citizens are being asked to endure.