Eurozone finance ministers pressed Greece early Tuesday to prepare new budget cuts soon and conclude negotiations with bank creditors on a massive debt writedown within days to avoid a messy default.
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| Luxembourg Prime Minister and Eurogroup president Jean-Claude Juncker arrives before an Eurogroup Council meeting at EU headquarters in Brussels. European finance ministers warned Monday they will not buckle over a massive Greek debt writedown with banks, as the head of the IMF called for radical eurozone decisions to avoid a 1930s-style crisis. (AFP Photo/Georges Gobet) |
European economic affairs commissioner Olli Rehn also urged Greece to accelerate economic reforms in order to spur growth. after talks between finance ministers that began Monday afternoon and ended past midnight.
Greece has undertaken a raft of economic reforms, drastic budget cuts and tax increases since it received a first bailout in 2010, but it risks missing its deficit reduction targets due to the deteriorating economic situation.
The Greek state revenue was 873 million euros ($1.1 billion) below target in 2011.
Athens, still struggling after a 110 billion euro bailout in 2010, is waiting for a second 130 billion euro rescue from its eurozone partners, but a debt writedown deal with private creditors is a precondition for the new loan.
Greek finance ministry sources said officials had given themselves until February 13 to clinch a deal with lenders, after the Institute of International Finance said it had put its best possible offer on the table.
"We welcome the increased convergence and ask the Greek government to reach in the next few days a common understanding on the main terms and conditions of the PSI (private sector involvem]
ent) offer," Juncker said.
Juncker called for a bigger contribution from private creditors, saying the interest rate on new bonds that would replace old debt should be below 4.0 percent. The banks want at least 4.0 percent.
Greece and the IIF have been negotiating a deal aimed at cutting 100 billion euros from the country's 350 billion euro debt mountain.
The writedown would help Greece reduce its debt from around 160 percent of gross domestic product (GDP) currently to about 120 percent in 2020.
Athens needs a deal quickly if a voluntary debt exchange is to take place before March 20, when a 14.4 billion euro bond redemption is due.
