Greece Set for Bailout Reward

European creditors are expected to ease bailout terms in wake of election results.

Greek voters are likely to get a reward for backing pro-euro parties, with European creditors set to ease bailout terms on the debt-swamped country mired in the fifth year of recession.

A first step will be when Greece’s still to-be-formed government requests modifications to the 240 billion-euro ($303 billion) rescue programs, leading to a revision of Greece’s economic-performance targets sometime before September, a European official told reporters in Brussels today.

Europe floated the relief as the victor in the June 17 Greek election, Antonis Samaras of the New Democracy party, accelerated preparations for a coalition government including his historic 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 today. “The process is speeding up. It is possible that in the next few hours, or within the day, a government can be decided.”

European officials shrouded possible tweaks to the program in ambiguous terms, fearful of alienating the public in creditor countries such as Germany and the Netherlands where resistance is high to letting Greece -- the origin of the crisis that has brought the 17-nation euro to the brink of breakup -- off lightly.

German Chancellor Angela Merkel sought to damp speculation that the terms of Greece’s bailout might be relaxed.

“The important thing is that the new government sticks with the commitments that have been made,” Merkel told reporters yesterday at a summit of world leaders in Mexico. “There can be no loosening on these reform steps.”

A number of finance ministers oppose giving Greece more time to meet targets for deficit reduction, structural reforms or the selloff of state assets, the euro-area official said at the Brussels briefing on condition of anonymity. Still, Greece’s deteriorating economy makes it delusional to hew to the current conditions, the official added.

Greece’s Democratic Left set seven conditions for joining the government, including extending the deficit-cutting timeline to 2017 from 2014 and reversing structural overhauls such as cuts to the minimum wage and pensions. The Pasok Socialist party broadly agreed with those demands.

“Forming a government is tied to the need to form a national negotiating team to ensure the unfavorable terms of the bailout are revised, the terms that were imposed on us, against our will at many points in the first phase of negotiations,” said Evangelos Venizelos of Pasok, who as finance minister from June 2011 to March 2012 negotiated the second aid package.

 

 Bloomberg News

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