The leaders of Germany, Italy and Greece are “optimistic” the $170 billion rescue package can be cleared next week, a spokesman for Merkel said Friday after the three held a conference call. Hours earlier, the French prime minister warned against letting Greece default.
That means the euro currency union’s main powers are now pushing toward resolving the uncertainty hanging over Greece at a meeting of eurozone finance ministers on Monday.
Agreement on the bailout, which comes on top of a $145 billion rescue granted in 2010, has been delayed for months due to doubts over Greek political leaders’ commitment to tough new austerity measures as well as the worsening economic situation in the country that kicked off Europe’s debt crisis two years ago.
Some eurozone governments’ caution over handing out more money to Athens had investors wondering whether Greece would be forced to default and leave the euro instead. After days of confusion, Germany – the main bankroller for the bailouts – made it clear it wanted to see Greece’s deal through.
“The three leaders are optimistic that the finance ministers can find a solution to the pending questions at the Eurogroup on Monday and thereby contribute to the stabilization of Greece,” Steffen Seibert said in a statement, after Merkel, Italian Prime Minister Mario Monti and Greece’s Premier Lucas Papademos held a conference call earlier Friday.
Papademos later also called Dutch Prime Minister Mark Rutte, whose country is one of the biggest bailout skeptics.
Greece is under big pressure to get the green light on the bailout so it can move ahead with a related $130 billion debt-relief deal with private bondholders that will take weeks to implement. That deal has to be completed before March 20, when Athens faces a bond redemption it cannot afford.
Tensions between Greece and the rest of the eurozone hit new highs this week as politicians in Athens and other European capitals blamed each other for the problems related to the bailout. Seven people were detained Friday following an anti-austerity protest in which eggs were thrown at the German embassy in central Athens.
But French Prime Minister Francois Fillon warned that the fallout of letting the country go up in financial flames would be far-reaching.
“We must do absolutely everything so that there is not a default by Greece, which would be dramatic for Greeks themselves and dramatic for Europeans,” he said on RTL radio Friday.
Now that the Greek Parliament has approved austerity measures demanded by international creditors and banks have agreed to help in the bailout, “the Europeans must now honor their commitments. That is the position that France is defending,” Fillon said.
Some European politicians have downplayed the effects of a default by Greece, but Fillon called that “totally irresponsible.”
The last issues to resolve before a bailout is rubber-stamped include making sure the aid program brings Greece’s debt down to a sustainable level and setting tighter controls on Athens’ spending decisions.
Germany and several other countries want Greece to set up a form of escrow account — separate from the main government budget — that would give priority to servicing Greece’s debt over spending on government services.