The European Union says it is set to ease the strict austerity conditions of Greece's financial bailout, possibly agreeing to changes in the rescue package in the next few months.
With Greece on the verge of forming a new coalition government after Sunday's parliamentary elections, one EU official anonymously said given the country's worsening economic conditions it would be “stupid” to keep the existing bailout terms.
He said that forcing Greece to adhere to all the terms of its $168-billion rescue secured earlier this year “would be signing off on an illusion.” He said it is “delusional” to say that the bailout pact does not need to be renegotiated. One key European financial leader, Luxembourg Prime Minister Jean-Claude Juncker, said officials could alter some terms of the bailout, but not substantially.
Greece is in the fifth year of a recession, with high unemployment. New Democracy leader Antonis Samaras, a conservative set to create a new government with the Greek socialists, is calling for a two-year delay in the 2014 deadline for Greece to achieve a budget surplus.
As with earlier extensive European negotiations over Greece's massive debts, his effort to ease the rescue terms could draw opposition from German chancellor Angela Merkel. She has led some eurozone leaders in forcing debt-ridden countries to adopt austerity measures to rein in deficits.
Ms. Merkel told reporters at the G20 summit in Mexico that Greece's creditors need to quickly visit Athens and ensure it adheres to the bailout conditions.
“We have to ensure that the troika drives quickly to Athens. We signed a program for Greece and the framework for this program must be maintained. This means that we must ensure that Greece sticks to its obligations.”
One Greek lawmaker, Olga Kefalogianni of the New Democracy party, said the country's creditors need to realize the need for easing the bailout terms.
“Well, I think that our partners must understand that they need to give us some breathing space, that reforms are necessary, but we can not work with this austerity package which actually is keeping us in a vicious cycle of recession. Greece is not the only problem right now in the eurozone. Therefore it is clear that the partners need to change their stance with regards to what they have been doing up to now.''
While Greece's financial problems remain unresolved, Spain has emerged as a new focal point for the eurozone debt crisis, now in its third year. Analysts fear that the Madrid government could follow Greece, Ireland and Portugal in needing an international bailout, beyond the recent rescue for Spanish banks.
Spain's short-term borrowing costs jumped again Tuesday, to their highest level in 15 years.
