Further humiliation awaits Athens on bailout terms

Final decisions on the Greek bailout should be taken on Monday after Greece delivered on further cuts and political assurances at a special teleconference between eurozone finance ministers last night.

However, further humiliations appear to be in store for Athens as a statement following the meeting hinted that the €130bn would be put into an escrow account, with creditors having priority over payments to keep state services running. A statement issued after the near four-hour conversation read: “Further considerations are necessary regarding the specific mechanisms to strengthen the surveillance of programme implementation and to ensure that priority is given to debt servicing.”

The troika finalised and presented its analysis on the sustainability of Greece’s public debt, which they need to show it is possible to reduce it from 160% to 120% by 2020 to be in line with IMF rules for lending.

ECB board members said the bank had decided to distribute profits from Greek bonds to member states, which they could then decide to pass on to Athens.

If they hold the bonds to maturity having bought them at a substantial discount on the secondary market, the ECB could make up to €15bn. It is possible they could sell them at full face value to the EU rescue fund, the EFSF, releasing the money for Greece now.

This would fill any gap in the funding required and suit a number of countries. Germany has said it will not ask parliament to approve any further money for Greece. Now, however, once the ministers take the final decision at Monday’s eurozone meeting to release the funds, the money will have to be raised by the EFSF and arrangements finalised within a tight time frame for the bond swap in the private sector to halve this debt by €100bn.

Timing is important as investors will want to be sure the money has been raised before they agree to park their bonds for possibly a number of weeks pending the swap. The immediate problem is the need for Germany and the Netherlands to get approval for the new bailout agreement from their parliaments. The Bundestag is due to do so at the end of the month, which would mean the EFSF could not raise the money before then.

A sum of €57.5bn to €93.5bn in cash and bonds needs to be in place to facilitate the debt restructuring. Wolfgang Schauble, the German finance minister, yesterday said on radio: “We can help, but we are not going to pour money into a bottomless pit.” Greece’s 82-year-old president, Carlos Papoulis, took issue: “Who is Mr Schäuble to taunt Greece? Who are the Dutch? Who are the Finns?”

Mr Papoulias was a member of the resistance during Greece’s occupation by Nazi Germany and later studied law in Germany. Earlier yesterday, he announced he was forgoing his €300,000 per annum salary in solidarity with his citizens.

Mario Monti, the prime minister of Italy, also insulted the Greeks in the European Parliament yesterday when he was forced to explain that his description of Greece as corrupt was a reference to the past.