Eurozone crisis: Cuts not enough as EU chiefs ponder Greek bailout

THE finance ministers of the eurozone want to put Greece under even tighter surveillance in return for a €130 billion (£108bn) bailout, even after Athens managed to deliver on several key demands last night.

Following a three-and-a-half hour conference call between the finance chiefs of the 17 countries that use the euro, the ministers hailed the strong assurances that Greece had found a further €325 million (£270m) in cuts on top of austerity measures already agreed.

The ministers also welcomed news the leaders of the main Greek political parties would implement promised cuts and reforms even after elections expected in April.

However, in a sign of the deep distrust that has built up – especially among rich euro nations such as Germany, the Netherlands and Finland – Jean-Claude Juncker, the prime minister of Luxembourg, who also chairs the finance ministers’ meetings, said that better surveillance mechanisms had to be set up before new aid could be released.

“Further considerations are necessary regarding the specific mechanisms to strengthen the surveillance of programme implementation and to ensure that priority is given to debt servicing,” Mr Juncker said.

The statement appeared to be a reference to a Franco-German proposal to set up an account, separate from Greece’s general budget, that would be dedicated to repaying Greece’s massive debt. It was unclear whether this account would only manage the bailout money or whether government revenue could also be funnelled into it.

Such an account would give the eurozone more control over what Greece does with its money, after the country has repeatedly missed budget, reform and privatisation targets over the past two years.

However, it could constitute an unprecedented interference into the fiscal affairs of a sovereign state in Europe.

Finance ministers held their conference call amid doubts in some countries over whether the €130bn bailout, which comes on top of a €110bn (£91bn) rescue granted in May 2010, can ultimately save recession-hit Greece.

Yet, despite rumours that the bailout could be delayed until after the elections, Mr Juncker said he expected the finance ministers “to be able to take all the necessary decisions” at their next meeting on Monday.

Greece does not have much time to secure the bailout because it risks defaulting on a €14.5bn (£12bn) bond redemption in late March.

EU sources said some in the eurozone doubted the commitment of Greece’s leaders to austerity, and queried whether it would be enough to bring Greece’s debt-to-GDP ratio down from 160 per cent now to a target of 120 per cent by 2020.

“There are proposals to delay the Greek package or to split it, so that an immediate default is avoided, but not everything is committed to,” one official said ahead of the eurozone finance ministers call. He added: “They’ll discuss the options.”