Eurozone loses patience with Greece

Euro zone finance ministers told Greece on Saturday it could not go ahead with an agreed deal to...

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Euro zone finance ministers told Greece

on Saturday it could not go ahead with an agreed deal to restructure

privately-held debt until it guaranteed it would implement reforms needed to

secure a second financing package from the euro zone and the IMF.

Euro zone ministers had hoped to meet on Monday

to finalise the second Greek bailout, which has to be in place by mid-March if

Athens is to avoid a chaotic default. But the meeting was postponed because of

Greek reluctance to commit to reforms.

Instead, the ministers held a conference call on Saturday to take

stock of progress on the second financing package, which euro zone leaders set at 130 billion

euros back in October.

"There was a very clear message that was

conveyed from all participants of the teleconference ... to the Greeks that

enough is enough," one euro zone official said. "There is a great

sense of frustration that they are dragging their feet.

"They should get their act together and

start talking honestly, decisively and speedily with the Troika on the aspects

of the programme that remain to be finalised - on fiscal and labour market

reforms," the official said.

The Troika are the representatives of the

European Commission, the European Central Bank and the International Monetary

Fund, who have prepared a Greek debt sustainability analysis on which the

second financing programme will be based.

"The main issue is the lack of reform,

or prior action, in Greece," a second euro zone official said.

Euro zone ministers were also dissatisfied

with Greek Finance Minister Evangelos Venizelos because they believed the

minister was paying more attention to his position within his party ahead of

the April elections, than to talks about reforms.

"There is a great sense of frustration

with Minister Venizelos, who is very hard to get hold of because he is very

busy campaigning for the leadership of (the Greek party) PASOK, so he is not

available to meet with Troika members," the first official said.

"He is preparing his own political

future, rather than the future of his country. People are seriously disgruntled

about that and have conveyed this very clearly to him this afternoon," the

official said.

"There is an increasing sense of

frustration that why should we honour our part of the bargain, which we have in

the past, while Greece does not seem to care that much, and has not delivered

their part of the bargain," the official said.

ATHENS ADMITS TO TOUGH TALKS

In Athens, Venizelos admitted to a growing

sense of impatience with the Greeks.

"There is great impatience and great

pressure not only from the three institutions that make up the troika but also

from euro zone member states," Venizelos said after what he called a

"very difficult" conference call with euro zone counterparts.

"The moment is very crucial. Everything

should be concluded by tomorrow night."

Jean-Claude Juncker, who chairs the

Eurogroup of euro zone finance ministers, voiced the possibility of default.

"If we were to establish that everything

has gone wrong in Greece, there would be no new programme, and that would mean

that in March they have to declare bankruptcy," he said in advance copy of

comments to news weekly Der Spiegel.

Greece has secured a debt restructuring deal

with private creditors to halve the value of Greek debt in nominal terms and in

exchange receive new, 30 year bonds with an average coupon below 4 percent,

officials said.

The restructuring is to help make Greek debt

sustainable by cutting it to 120 percent of GDP in 2020 from 160 percent now.

But euro zone governments will only agree to

bolster the debt restructuring, called private sector involvement (PSI), with

30 billion euros and further finance the Greek government through 2014 if

Athens presses on with lagging reforms.

"The message to Greece now is very

clear. The PSI as it stands now is broadly OK but we will not allow you to go

ahead with the PSI unless we have guarantees that the rest of the reform to

make the whole situation sustainable in the long run will be delivered,"

the first official said.

"We don't want to give them the PSI,

because once we do, we surrender our leverage to obtain any more concrete

commitments in terms of policy," the official said. "Before we go

ahead with the PSI ... we want to have assurances that Greece is actually

capable of implementing the second programme."

Debt restructuring is likely to hit Greek

banks harder than others, because they hold a lot of Greek government bonds.

Some EU officials said on Friday that euro

zone governments may now have to contribute closer to 145 billion euros than

the originally envisaged 130 billion to the second financing package to help

recapitalise Greek banks after the bond swap.

But there is strong resistance to that idea

from several countries, including paymaster Germany.

"It is highly unlikely that the overall

envelope will increase," the second official said.

"In some capitals there is absolutely

no appetite whatsoever to reopen the size of the financing package," the

first official said.