Greek premier rushes to Brussels to secure bailout

By Gabriele Steinhauser

Associated Press

Published: Sunday, Feb. 19 2012 12:00 a.m. MST

A man begs at a traffic light as a woman enjoys her coffee reading a fashion magazine in a cafe of a luxurious hotel on Athens' Syntagma main square on Sunday 19, 2012. The Greek parliament is set to vote on emergency austerity measures next week necessary for a euros130-billion ($170- billion) bailout deal with the EU and IMF to avoid default.

Dimitri Messinis, Associated Press

BRUSSELS — Prime Minister Lucas Papademos rushed to Brussels on Sunday, a day before eurozone finance ministers have to decide whether Greece will get a €130-billion ($170-billion) bailout and avoid a potentially devastating default.

Leaders from Germany, Italy and Greece have said they are optimistic that the deal on a second massive bailout for Athens can be clinched at the meeting after months of delay, but critics have expressed doubts over Greek political leaders' commitment to austerity and there are still difficult details to be ironed out.

Pressure is on Papademos to seal the deal and his presence in Brussels could lend more weight to Greece's efforts and promises.

Monday's meeting could "result in the need to take very important decisions for the country and require immediate and thorough consultation between the Prime Minister and Minister of Finance," Papademos' office said in a statement. He is also expected to hold talks with representatives of Greece's private creditors on a related €100-billion debt relief deal.

Greece is straining to secure the rescue loans and the debt relief deal quickly to avoid defaulting on a €14.5 billion bond redemption on March 20. The government has already pushed a massive austerity and reform package though parliament and is expected to introduce in Parliament on Monday two more pieces of emergency legislation — including wage and pension cuts. There were scattered protests over the cuts in Athens on Sunday and about 60 people detained.

High-level finance ministry officials from the 17 countries that use the euro as their currency were already meeting in Brussels Sunday to evaluate Greece's latest austerity plans, as well as whether the new bailout and a related debt-relief plan could bring the country's debt down to a sustainable level.

Before the rest of the eurozone and the International Monetary Fund can sign off on Greece's new rescue package, which was tentatively agreed to in October, and comes on top of a €110 billion bailout granted in 2010, several issues have to be resolved:

Germany and other rich euro countries want Greece to set up a separately managed account that would ensure that the country services its debt. The idea of such an escrow account is that it would maintain pressure on Greece to stick to promised austerity and reform measures, without the eurozone risking the destabilizing effects of a default.

The escrow account would give legal priority to debt and interest payments over paying for government services. However, it is still unclear whether only funds from the bailout would be funneled into the account or whether Greece will also be expected to pay in some taxpayer money.

"There is agreement within the Eurogroup that there will be such a special account, or 'escrow account' in jargon, for the disbursement of the the second aid package," German Finance Minister Wolfgang Schaeuble told German daily Tagesspiegel's Sunday edition. "The account ensures a priority for debt reduction."

But a European Union official said forcing Greece to also channel government revenue into the escrow account "is not off the table." He was speaking on condition of anonymity because the talks among finance ministry officials were still going on.

Such a requirement would be an unprecedented intrusion into a sovereign state's fiscal affairs and could ultimately see Greece force to pay interest on its debt rather than teachers, doctors or other government employees.

The European Commission, the EU's executive arm, prepared several proposals for an escrow account for Sunday's and Monday's meetings. However, the IMF does not like the idea of such an account, the official said.

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