EU Set to Ease Greek Bailout Terms

Posted June 19th, 2012 at 8:15 pm (UTC-5)
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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.

Greece's huge debt and Europe's sluggish economy have undermined the euro currency used by 17 European Union nations. A turmoil in the euro zone could have a negative effect on global economy. Therefore, a recovery plan for the euro zone was one of the topics discussed at the summit of the group of 20 economies in Los Cabos, Mexico.

The International Monetary Fund welcomed the discussion in a statement Tuesday. IMF chief Christine Lagarde commended the intent of the G20 leaders to work toward a more integrated financial structure to stabilize the euro zone.

G20 leaders meeting in Mexico pledged on Tuesday to have the Euro Area countries work in partnership with the next Greek Government toward financial reform and strength.

Greece's efforts to ease its bailout obligations are meeting some opposition in western Europe, notably from German chancellor Angela Merkel who has been at the forefront of forcing debt-ridden countries to adopt austerity measures to reduce deficits.

Ms. Merkel told reporters at the G20 summit that Greece's creditors need to quickly visit Athens and ensure it adheres to the bailout conditions.

“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.”

But some Greeks, including lawmaker Olga Kefalogianni of the New Democracy party, say 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.