Creditors demand to see action on new pledges as sovereign debt default looms in weeks if rescue package is withheld
Greece's hopes of promptly securing a €130bn lifeline were set back early this morning after the finance ministers of the eurozone responded with scepticism to Athens's declaration that it is committed to slashing public spending to the bone under orders from the rest of Europe.
With the clock ticking on a possible sovereign debt default by Athens within weeks, eurozone finance ministers postponed a decision on Greece's rescue until next week, piling the pressure on the Papademos government.
Following weeks of brinkmanship that have poisoned relations between the bankrupt country and its eurozone creditors, the ministers and senior officials from the eurogroup, the European central bank, the European commission, and the International Monetary Fund voiced exasperation with Greek delaying tactics.
The meeting in Brussels declined to activate the bailout to prevent an outright Greek insolvency by the end of March when the country has to redeem more than €14bn in debt.
The Greek finance minister, Evangelos Venizelos, left the Brussels meeting reportedly stating that his country now needed to decide whether or not to remain in the single currency.
Despite announcements earlier that the coalition government in Athens had yielded to savage new terms from the eurozone to qualify for the bailout, the eurozone finance ministers were unimpressed. The emphasis was on first getting Greece to deliver its side of the bargain.
"On the condition that the Greek parliament takes decisions on the prior actions over the coming days, then next week we can finalise decision on the overall package," said Olli Rehn, the European commissioner for monetary affairs.
"It's up to the Greek government by concrete actions through legislation and other actions to convince its European partners that the second [bailout] programme can be made to work."
Luxembourg's prime minister, Jean-Claude Juncker, the president of the eurogroup, said that the ministers would reconvene next week to review Athens's conduct and possibly sign off on the new rescue plan.
The Greek government still had to close a €325m funding gap before it would qualify for a new bailout.
"Not everything that we need is on the table," said Juncker.
Earlier Venizelos had demanded a conclusion to the bailout saga, but ran into stiff reservations from the key creditor country, Germany. "We finally have a staff level agreement for a new, strong and credible programme," said Venizelos. "We also have a deal with the private creditors on the basic parameters. We now need the political endorsement of the Eurogroup for the final step."
Amid a mounting sense of despair over Greece, any deal that might be struck may already prove inadequate to its purpose.
With unemployment soaring in Greece, revenue sources drying up, recession deepening, and social unrest increasing, there is pessimism and resentment on both sides, a sense that the austerity cannot work, and that a default is more of a question of when, not if.
"Just because Greek leaders have agreed on targets does not mean that they will or indeed can be delivered," said Sony Kapoor of Re-Define, an economics thinktank in Brussels. "We have just reached a temporary truce. The war will continue to be fought for some time to come."
The €130bn, even if agreed, is unlikely to be enough to achieve the goal of returning Greek debt to sustainable levels, given the country's deteriorating fiscal position.
Mario Draghi, the ECB's chief, and Christine Lagarde, the head of the IMF, attended the Brussels meeting of eurozone finance ministers. European commission sources said a signed memorandum committing the Greek government to a further €3.3bn in savings – which still has to go through parliament in Athens this weekend – had to be delivered within five days to meet the tight deadlines for avoiding a Greek default. If a deal is struck on the new bailout, the IMF will need to rule that the arrangement will eventually render Greek debt levels sustainable.