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10 February 2012

FT: Eurozone dismisses Greek budget deal


Eurozone finance ministers dismissed as incomplete a reputed €3.3 billion package of Greek budget cuts presented to them in the hope of securing a €130 billion bailout, and sent the country's finance minister back to Athens with a fresh set of demands and an urgent deadline.

In exchange for signing off on the loan, which Greece is depending on to avoid a potentially chaotic default next month, its lenders are demanding €325 million in further cuts to this year’s budget, parliamentary approval of a sweeping reform package, and a pledge from the country’s political leaders to ensure they will maintain their commitment after April elections.

They also warned of more intensive involvement in the Greek economy to improve tax collection and accelerate the sale of state-owned assets. "In short, there is no disbursement before implementation", said Jean-Claude Juncker, the prime minister of Luxembourg and head of the Eurogroup, bemoaning a succession of broken promises from Athens.

If those conditions were met, then Mr Juncker said finance ministers would reconvene to sign the loan agreement, and set in motion a private sector bond swap that is expected to cut some €100 billion from Greece’s €350 billion debt pile and help restore its finances. The details of that exchange were virtually complete, officials said. The reception in Brussels marked a sharp contrast from the near-euphoria with which Greece’s political leaders presented the deal earlier in the day that they billed as the solution to weeks of market-rattling brinkmanship.

Full article (FT subscription required)



© Financial Times


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