European officials are preparing to revamp Greece’s bail-out package after concluding that Athens would be unable to raise money in the markets early next year, as envisaged under a €110 billion ($158 billion) rescue plan.
Euro zone ministers this weekend publicly acknowledged that Greece would probably need additional cash from the European Union or other international institutions.
We think that Greece does need a further adjustment programme,” said Jean-Claude Juncker, Luxembourg’s prime minister and chairman of the eurogroup of finance ministers.
George Osborne, UK chancellor of the exchequer, said changes to the Greek bail-out programme were “inevitable”.
Although such a conclusion had been widely accepted by analysts and officials working on the issue, the public recognition marks a turning point in the debate over Greece’s future.
Officials involved in the discussions insist that no decisions on how further to help Greece have been made, though Greek finance minister George Papaconstantinou said it could include additional assistance from the euro zone’s €440 billion bail-out fund or further delays in Greek debt payments.
“We now have to complete procedures for borrowing in 2012 and 2013 from the temporary European mechanism as markets continue to be mistrustful of us,” Mr Papaconstantinou said, conceding Greece had dropped its plan to return to markets at the end of this year.
Mr Papaconstantinou and Mr Juncker were speaking after they attended a previously undisclosed meeting on Friday in Luxembourg between a select group of euro zone finance ministers and top EU officials.
Greece needs to raise €25 billion-€30 billion next year to meet debt repayments that would not be covered by its current bail-out loan.
In addition to selling bonds to the EU rescue fund, Athens could also propose a voluntary extension of maturities on debt due to expire next year, a Greek official said.
The option of restructuring Greek debt had been excluded, Mr Juncker said.
Jean-Claude Trichet, European Central Bank president, and Olli Rehn, the top EU economic official, have concluded a restructuring would cause more problems than it would solve, a top official said.
Mr Juncker also dismissed rumours that Greece was mulling an exit from the eurozone – which unnerved the markets on Friday – as “stupid”.
One senior European official involved in the meeting said Mr Papaconstantinou was invited so his fellow euro zone ministers could impress on him that Athens should stop seeking additional concessions without making greater efforts to implement a €50bn privatization plan and crack down on tax evasion.