Pressure on Greece to prioritise debt service

An EU official says some euro countries are pushing for Greece to funnel government revenue into a separately managed account dedicated to servicing its debts — an unprecedented intrusion into a sovereign country’s fiscal affairs.

Germany has made the creation of such an escrow account a precondition for giving Greece a €130 billion bailout.

But until now, it has been unclear whether the account — which would give debt and interest payments priority over paying for government services — would only contain bailout money or also money from Greek taxpayers.

The official said yesterday forcing Greece to channel government revenue into the account “is not off the table.”

He was speaking on condition of anonymity because the plan was being discussed in an ongoing meeting of high-level eurozone officials.

Lucas Papademos, the prime minister, headed to Brussels unexpectedly yesterday, a day ahead of today’s crucial eurozone finance ministers’ meeting to discuss a €130bn bailout necessary to keep Greece from going bankrupt.

The leaders of Germany, Italy and Greece have said they are optimistic that the deal on a second massive bailout for Athens can be clinched at the summit after months of delay, but critics have expressed doubts over Greek political leaders’ commitment to austerity.

Papademos’ office told The Associated Press they were not aware of any scheduled meetings yesterday, but his departure has led to speculation he is meeting with officials ahead of the summit.

Yesterday, a working group of lower-level officials was meeting, but German sources contacted by the Associated Press denied there was a higher-level meeting going on.

Papademos’ government is expected today to introduce in parliament two pieces of emergency legislation seen as crucial in convincing Greece’s creditors of the government’s willingness to see reforms through quickly.

The legislation, which includes wage and pension cuts and a supplement to the 2012 budget making €3.2bn in cuts, is expected to be debated in committee tomorrow and submitted to a vote on Wednesday.

More actions — including measures passed last July but never implemented — must be approved by the end of February.

These include slashing the wages of some special categories of employees, such as special advisers to the government, as well as professionals, such as lawyers.

Also, the government must shut down some more state agencies and update the list of pharmaceuticals approved by the National Health Service.

A Sunday newspaper, To Vima, estimated that by the end of the month, the government must pass some 79 laws and ministerial decrees to comply with the creditors’ demands.

Meanwhile, several thousand banner-waving protesters staged rallies in Athens yesterday to protest budget cuts as ministers prepare to approve the new bailout.

Hundreds of police shadowed the latest demonstrations, held a week after parliament passed new austerity measures that sparked protests which saw gangs of rioters torch dozens of buildings in the Greek capital.

“Poverty and Hunger Have No Nationality” read one banner carried by demonstrators on Syntagma square outside parliament.

“We Are Greeks, Merkel and Sarkozy Are Freaks” said another, referring to the German and French leaders.


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