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16 February 2012

FT: Athens faces tough bailout terms


A €130 billion bailout of Greece will contain unprecedented controls on Athens' ability to spend funds.

The agreement is likely to include an escrow account that must always contain enough cash to pay Greece’s debt for nine to 12 months. If the account falls below that level, money will be taken from funds earmarked to run the Greek government, according to people briefed on the talks. In addition, the bailout will include a permanent and beefed-up presence of international monitors who will attempt to keep real-time tabs on the Greek government’s spending decisions, officials said.

If the deal is finalised by Monday, it will still include a list of 24 “prior actions” that Greece must complete by the end of the month, before aid is released. The deal will be quickly followed by a €200 billion Greek debt restructuring, with offers to private debt holders to participate. The offer would be open for 10 days, and the swap formally completed a week before a €14.5 billion bond becomes due on March 20, narrowly avoiding a default.

But senior officials warned that a deal was not assured. According to one official, under the plan Greece’s debt would be more than 128 per cent of economic output by 2020. That is well above the 120 per cent the International Monetary Fund and several northern EU countries have demanded.

Jan Kees de Jager, the Dutch finance minister, told his parliament that, in order to get to 120 per cent of economic output, the bailout would have to rise to €136 billion. Dutch, German and Finnish officials have insisted on a €130 billion limit and Mr de Jager said the three triple-A rated countries had come close to vetoing the programe. “We decided to postpone the eurogroup meeting because we realised that otherwise it would have gone wrong, to put it simply”, Mr de Jager said.

Full article (FT subscription required)



© Financial Times


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