Brussels says Greece and troika will sort out new deal on bailout
GREECE and the troika will renegotiate the programme on which the second Greek bailout is based because circumstances have changed, a senior eurozone official said yesterday.
Greece secured a second €130bn bailout package in February from Europe and the IMF, but an inconclusive general election in May and a return to the ballot box last Sunday delayed the implementation of the conditions attached to the bailout.
New terms are now likely to be agreed over the summer.
Reports of a new deal for Greece came as Finance Minister Michael Noonan said the crisis in the eurozone was not about one country but a crisis of the whole bloc.
UCD economist Colm Mc-Carthy said separately that the Government should use the Spanish banking crisis to insist that the terms of Ireland's bailout deal be changed.
European officials floated the new deal as the victor in the weekend Greek elections, Antonis Samaras of the New Democracy party, accelerated preparations for a coalition government including his Socialist rivals with a mandate to loosen the bailout constraints while keeping Greece in the euro.
"Agreement on a policy roadmap is the definitive point to form a government," Fotis Kouvelis of the Democratic Left, the third part of the planned coalition, said in Athens.
"The process is speeding up. It is possible that in the next few hours, or within the day, a government can be decided."
Greek parties are currently in talks to create a coalition government with a mandate to renegotiate the terms of the bailout, which has staved off national bankruptcy, but at the cost of deeply unpopular austerity measures.
The United States, the largest IMF member, said it supported discussions to review the Greek bailout programme, but German Chancellor Angela Merkel has said that loosening Greece's reform promises would be unacceptable.
A number of finance ministers oppose giving Greece more time to meet targets for deficit reduction, structural reforms or the sell-off of state assets, the senior euro-area official said at the Brussels briefing on condition of anonymity.
Greece's deteriorating economy makes it "delusional" to stick to the current deal, the official added.
"Anybody who would say that we need not, and cannot renegotiate the MoU (memo of understanding) is delusional, because he, or she, would be under the understanding that the whole programme, the whole process, has remained completely on track ever since the weeks before the Greek first election," the official said.
"Because the economic situation has changed, the situation of tax receipts has changed, the rhythm of implementation of the milestones has changed, the rhythm of privatisation has changed, if we were not to change the MoU, it does not work," he said.
"We would be signing off on an illusion. So we have to sit down with our Greek colleagues and say: this is where we should be in July, and this is where we are in July, and there is a delta. Let's find out what the delta is and then how to deal with the delta -- that is a new MoU," the official said.
The official said representatives of the IMF, the ECB and the European Commission will go to Greece as soon as there was a new government to review the implementation of the programme so far and prepare for negotiations.
The troika will report its findings to eurozone finance ministers who will decide how to move forward, and troika officials will then negotiate with Greece.