Eurozone stalls Greek cash aid pending new conditions

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Eurozone finance ministers refused Thursday to give their immediate backing to a second bailout for Greece despite a last-minute deal in Athens on austerity measures demanded by creditors.

After rival Greek parties agreed a fresh round of deep cuts, triggering another general strike in Greece, Luxembourg Prime Minister Jean-Claude Juncker said the Eurogroup of finance ministers may only decide on the rescue next week.

The ministers huddled in Brussels to review the deal reached in Athens aimed at unlocking a bailout package worth 130 billion euros ($171 billion) and prevent a devastating default.

Greek Finance Minister Evangelos Venizelos urged his counterparts to endorse the debt rescue after political leaders in Athens agreed on a new round of austerity.

But German Finance Minister Wolfgang Schaeuble warned that the purpose of talks would be “to make clear to Greece and the partners in the negotiations what are the conditions for a second agreement.”

Four months after European Union leaders agreed to mount a second bailout, provided private sector creditors first agreed a massive write-down of their holdings, Juncker said there were simply too many “points to clear up.”

But “if it’s not tonight, it will be done next week,” Juncker said, noting “enormous progress” on various fronts.

He said ministers had to “examine in detail the different strands on the table.”

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“After a long and tough period of negotiation, we finally have a staff level agreement with the troika for a new, strong and credible programme,” Venizelos said, referring to the team of EU, IMF and European Central Bank auditors who negotiated with the Greek government.

“We now need the political endorsement of the Eurogroup for the final step,” Venizelos added.

He said a deal had also been agreed on the “basic parameters” of a bond swap with private creditors, aimed at slashing 100 billion euros from Greece’s 350-billion-euro ($465 billion) overall debts.

As they spoke, some 8,000 protesters had gathered on the streets of Athens on the eve of a 48-hour strike over what unions called “barbaric” wage and pension cuts.

Greek press reports said the monthly minimum wage would fall by 22 percent, to some 586 euros before taxes, paid 14 times a year.

Greece’s debts amount to 160 percent of its gross domestic product, but its international backers are demanding that this be brought down to a maximum of 120 percent in 2020.

Some governments have said they will not pay a cent more than what was agreed in October, hence the pressure on Greece to squeeze out more savings from its recession-battered coffers.

Only then would the EU and the IMF hand over a loan package including sweeteners for Greece’s ravaged banks.

The bond exchange though will take several weeks to perform, raising concerns whether it can completed before Greece faces 14.5 billion euros in payments due on March 20.

IMF managing director Christine Lagarde hailed what she said was “clearly some very encouraging news coming out of Athens.”

However, she also cautioned: “There is still more to do.”

“I think we’re all agreed that there needs to be this labour market reform and the adjustment of wages to align more with productivity,” IMF spokesman Gerry Rice added in Washington.

Greece faces elections in April to replace Prime Minister Lucas Papademos’ caretaker government.

EU Economic Affairs Commissioner Olli Rehn stressed that the first step was for Greece to get its new spending plans through parliament over the coming days.

Some of its eurozone partners, such as the Netherlands, stressed that they also have to put any package to their parliaments.

The deal with the private creditors would likely see the face value of the 200 billion euros in bonds that they hold cut in half — but their total losses may hit 70 percent given they will receive 30-year bonds at lower interest rates.

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