Eurozone governments worked into the night on Monday, hoping to agree on a long-awaited rescue package for Greece that would save it from a potentially calamitous bankruptcy next month, but several key points of division remained, senior officials said.
Finance ministers meeting in Brussels Monday were still wrangling over how to reduce Greece's debt load further and impose even tighter control over the country's spending, and negotiations were expected to stretch late into the night. Rich countries like Germany and the Netherlands and the International Monetary Fund want to be sure that Athens can eventually survive without aid.
But after months of delays, time for Greece is running out. The country needs to secure the 130 billion euro ($170 billion) bailout so it can move ahead with a related 100 billion euro ($130 billion) debt relief deal with private investors. That deal needs to be in place quickly if Athens is to avoid a disorderly default on a bond repayment on March 20.
"I am of the opinion that today we have to deliver, because we don't have any more time," Jean-Claude Juncker, the prime minister of Luxembourg who also chairs the meetings of eurozone finance ministers, said as he arrived in Brussels.
An uncontrolled bankruptcy would likely force Greece to leave the 17-country currency union and return to its old currency, the drachma, further shaking its already beaten economy and creating uncertainty across Europe.
Heading into the meeting earlier Monday, ministers were optimistic that a deal could be reached.
"We now have all of the elements to achieve an agreement," said French Finance Minister Francois Baroin. "Greece knows what it has to do, and we'll watch over it continually. We also know what we have to do."
But the finance ministers were also negotiating on several fronts, trying to move Greece's other creditors to increase their commitments. Greek Prime Minister Lucas Papademos rushed to Brussels to back up his finance chief, Evangelos Venizelos, in talks with the IMF, the European Central Bank and representatives of private holders of Greek debt.
The goal is to bring Greece's debt down to around 120 percent of gross domestic product by 2020 — the maximum the IMF sees as sustainable. At the moment, the country's debt load stands at more than 160 percent.
Last week, a new report prepared by the European Commission, the ECB and the IMF concluded that the new bailout, Greek spending cuts, and a planned 100 billion euro debt relief from private investors would still leave Greece's debt at almost 129 percent of economic output by the end of the decade.
Ministers were exploring several options to close that gap, but as talks dragged on Monday, no final solution appeared imminent.
A Greek official said Monday morning that there seemed to be agreement on further reducing the interest rate on Greece's first, 110 billion euro bailout as well as having national central banks in the eurozone, which also hold some Greek bonds, participate in the debt relief. The official was speaking on condition of anonymity because the talks were confidential.
However, other officials questioned the participation of national central banks, as well as whether the ECB would be willing to transfer profits from its Greek bond holdings back to Athens.
On the sidelines of the finance ministers' meeting, Venizelos headed into a new round of talks with representatives of Greece's private bondholders — mostly banks and investment funds — to explore whether they would be willing to accept further losses.
A current plan foresees private creditors swapping their old Greek bonds for new ones with half the face value, lower interest rates and much longer repayment periods.
But now some countries are pushing for bondholders to also give up on an accrued interest payment of around 5.5 billion euros on their old bonds, a demand that could further discourage investors from signing up to the debt swap.
Amid the ever-changing mood over the country's rescue, some frustration was setting in among the Greeks.
"Greece comes into today's Eurogroup meeting having fulfilled all the requirements for the approval of the new program," Venizelos said. "For Greeks, this is a matter of national dignity and a national strategic choice and no other integrated and responsible choice can be opposed to it."
The Greek parliament has faced down violent protests to approve the austerity measures demanded by the eurozone. Its main political leaders have committed in writing to uphold the bailout terms even after general elections in April. On Monday in Athens, the government introduced in parliament another two pieces of emergency legislation that would introduce austerity measures including wage and pension cuts.
Despite Athens' efforts, however, some countries have indicated their patience with Greece was growing short.
"We've seen that Greece time and time again fails to satisfy the conditions that the international community makes. ... In the Netherlands, it really is an issue that you have to lend money to a country that for the umpteenth time hasn't held itself to its agreements," said Jan Kees de Jager, the finance minister from the Netherlands, which has been especially hard on Greece. "So it's indeed essential to me, and also the Dutch government, that we have control over the money that we're going to lend."
To that end, Greece is expected to be forced to set up a separate account that would ensure it services its debt. This escrow account would give legal priority to debt and interest payments over paying for government services. That would maintain pressure on Greece to stick to promised austerity and reform measures and spare the eurozone the risk of a destabilizing default.
The escrow account would, however, be an unprecedented intrusion into a sovereign state's fiscal affairs and could ultimately see Greece forced to pay interest on its debt before paying salaries to teachers and doctors.
In addition, Greece's international creditors would station permanent representatives in Athens to monitor the country's progress.
Another issue under discussion is how much the IMF will contribute to the new rescue. The fund has provided one-third of the bailouts for Ireland and Portugal and Greece's first rescue package.
"The indication is that the figure will be rather low," a European Union official said, adding however that a final decision from the fund's board is still outstanding. The official was speaking on condition of anonymity because talks were not yet concluded.
Some worry that more austerity could exacerbate Greece's problems by putting a stranglehold on growth. Prime Ministers from a dozen European countries — including the U.K., Italy and the Netherlands — wrote a letter Monday to EU President Herman Van Rompuy and Commission President Jose Manuel Barroso calling for growth across the bloc.
"The crisis we are facing is also a crisis of growth," the letter said. "It is now time to show leadership and take bold decisions which will deliver results that our people are demanding."
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