Athens edges closer to deal on austerity measures

Greek prime minister Lucas Papademos was yesterday shuttling over and back between the troika, the creditor banks and political party leaders desperately trying to conclude a deal on new austerity measures.

Dutch prime minister Mark Rutte increased the pressure, talking down the danger of contagion to the rest of the eurozone if Greece exited, echoing similar remarks by Neelie Kroes the Dutch European Commissioner.

Reports that the parliament in Athens will be asked to vote through the terms of the debt writedown and new financing deal on Sunday means uncertainty will continue.

A meeting due to take place in Athens yesterday evening with the coalition government leaders was postponed while Mr Papademos worked to tie up the loose ends.

He needs the politicians to sign up to savings that will bridge the gap between the €130bn EU/IMF bail out and savings designed to bring the country’s debt down to 120% of GDP by 2020.

Although the deal with the bankers on a 50% haircut is believed to have been concluded over the weekend, Mr Papademos held last-minute discussions with the Institute of International Finance, representing the country’s private sector creditors, last night.

Mr Rutte said on Dutch radio: “It is in our interest that Greece remain [in the eurozone] and to achieve that it has to do all it has promised to do... but if that does not work out, then we are stronger now than a year and a half ago,” he said, adding: “There is less risk now.”

Recapitalising banks and setting up the European Financial Stability Facility bailout fund and other measures would all help contain contagion, he said.

Earlier, Commission vice president Ms Kroes said although she did not favour Greece returning to the drachma, their leaving the eurozone would not be a disaster.

Commission President Jose Manuel Barroso, however, insisted this was not on the cards. Reports suggested he has political agreement on cutting 150,000 public sector jobs over the next three years.

Finance ministers are on standby for a teleconference on the outcome of the talks. However this is not now expected to happen until tomorrow. They need to sign off on the deal and agree to the EU rescue fund, making preparations to raise the money on the markets.