BRUSSELS: Stressed eurozone states from Portugal to Finland faced up Saturday to the need to renegotiate Greece’s bailout repayments as “catastrophic” Athens finances returned to haunt the EU.
“We think that Greece does need a further adjustment programme,” Luxembourg Prime Minister Jean-Claude Juncker, who chairs the Eurogroup of finance ministers, said after closely guarded talks in Luxembourg late Friday.
“This has to be discussed in detail,” he said, indicating it would top the agenda at a two-day meeting of eurozone and European Union finance leaders in Brussels on May 16 and 17.
The resurrection of the Greek debt conundrum will reverberate around political Europe.
To begin with, it is sure to complicate coalition negotiations in Finland with an ultra-nationalist, anti- EU party that scored a significant breakthrough in elections on a platform of refusing to participate in Portugal’s upcoming bailout.
Dow Jones Newswires reported that Germany and France did not see eye to eye during the unscheduled Luxembourg meeting.
Greek newspapers also spoke of postponements on the maturity of 65 billion euros worth of bonds this year and next, a postponement of national deficit reduction targets as agreed with the EU and even a possible “grace” period of no interest payments.
The Greek public deficit for 2010 was revised upwards, from 9.4 percent of gross domestic product to 10.5 percent.
That was blamed on a deeper-than-anticipated national recession that combined with brutal cuts in public spending to hack away at tax revenue, and while the country’s top crimebuster has been moved to fight fraud and corruption in a bid to squeeze out every last euro due, the prospects for this year and next are slipping.
Greece was given a 110-billion-euro ($160-billion) bailout last year, the terms were eased by EU leaders in the spring and a new rejig would leave the issue weighing on EU partners’ finances well into the next decade at least.
Athens already owes more than a year-and-a-half of its entire economic output, some 340 billion euros, which markets consider unsustainable, leading to growing fears of ultimate default — the nightmare scenario for the eurozone as a whole.
“We did not discuss an exit for Greece from the eurozone, we think that would be a stupid option,” Juncker underlined after the meeting at a Luxembourg castle with Germany’s Wolfgang Schaeuble, France’s Christine Lagarde, Italy’s Giulio Tremonti and Spain’s Elena Salgado.
European Central Bank chief Jean-Claude Trichet, the EU’s economic affairs commissioner Olli Rehn and Greece’s George Papaconstantinou also took part in talks triggered by concerns in the United States and at the International Monetary Fund, that “ruled out any restructuring of Greek debt,” Juncker added.
The result will leave ongoing EU efforts to close off a sorry chapter at a late-June summit looking ever more complicated.
Greece was due to return to commercial borrowing markets next year, but with current yields on benchmark 10-year bonds hitting 15 percent — junk level compared to Germany — “it is in a pretty catastrophic situation,” according to a source close to the talks.