EU demands reforms from Athens before second bailout

As Athens is caught in the middle of a game of brinkmanship with its creditors, the EU warned they wanted new reforms even before they sign up to the second bailout and its austerity programme.

The country, now in its fifth year of recession, needs its next tranche of money by mid-April if it is not to default on its loans. But it must first agree a 50% cut in the face value of more than €200bn of debt with private investors.

EU finance ministers rejected the offer from the Institute of International Finance (IIF) objecting to the coupon interest reported to be around 4.25% for the debt to be serviced up to 2020. German finance minister Wolfgang Schäuble dismissed the IIF deal as haggling, saying: “You can see this in the bazaar any day”.

But there was no levity when it came to discussing the next Greek €130bn bailout at the EU finance ministers meeting in Brussels.

European Commissioner Olli Rehn made it clear that were not impressed with the failure of Athens to meet many of the targets set for its first €110bn bailout, despite delaying payments at times to put pressure on the government.

“Political party leaders are expected to commit to the second part of the programme,” he said. There was a major battle, forcing the prime minister to resign, when some opposition leaders initially refused to sign up to the austerity package.

Several of the finance ministers did not pull any punches in Brussels yesterday. Austrian minister Maria Fekter agreed that the political leaders would have to sign up to the new reforms. “There were decisions made in Greece, but the spending has not really decreased,” she said.

Sweden’s Anders Borg said: “They have been given so many chances and we have seen so little delivery.”

Discussions are due to continue in Paris today with the IIF pushing for all creditors, including the ECB to take a cut. Their clients own about 60% of the €350bn debt. The ECB has said it will not take part. Greek Finance Minister Evangelos Venizelos said they hope to conclude the talks by February 1 — just after the EU summit.

— Additional reporting Reuters and Bloomberg