Greece likely to get bailout but issues remain

Eurozone governments are likely to approve a long-elusive rescue package for Greece on Monday, saving it from a potentially calamitous bankruptcy next month, senior officials said.

But finance ministers meeting in Brussels will have a few last issues to wrangle over, such as tighter controls over Greece's spending and further cuts to the country's debt load.

Greece needs to secure the euro130 billion ($170 billion) bailout quickly so it can move ahead with a related euro100 billion ($130 billion) debt relief deal with private investors, which needs to be in place quickly if Athens is to avoid defaulting on a bond repayment on March 20.

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.

French Finance Ministers Francois Baroin told Europe-1 radio that while details will have to be worked out, "the political commitments have been made" for the bailout package, Greece's second in two years.

"We now have all the elements of a deal - elements of a participation that remains voluntary for banks and private lenders, and for public lenders states, central banks," Baroin said.

He is traveling to Brussels to meet his counterparts from the 16 other euro countries, as well as representatives for the International Monetary Fund, the European Central Bank and private holders of Greek debt.

Greece's Finance Minister Evangelos Venizelos, who arrived in Brussels Sunday night, said he was also optimistic that the new aid program could be agreed.

"Greece comes into today's Eurogroup meeting having fulfilled all the requirements for the approval of the new program," he 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 in Athens and nationwide strikes to approve the austerity and reform measures demanded by the eurozone. Its main political leaders have committed in writing to uphold the bailout terms even after general elections in April.

Despite Athens' efforts, however, several important elements of the deal remained unsolved.

To convince the rest of the eurozone that the new aid money won't be squandered, Greece will have to set up a separately managed account that would ensure that it services its debt. The idea behind such an escrow account is that it would maintain pressure on Greece to stick to promised austerity and reform measures, without the eurozone risking the destabilizing effects of a default.

The escrow account would give legal priority to debt and interest payments over paying for government services.

Eurozone finance ministry officials Sunday night concluded that only funds from the bailout would be funneled through the account and that Greece won't be required to pay in taxpayer money, German Finance Ministry spokeswoman Marianne Kothe said in Berlin, citing the current state of the negotiations.

The escrow account nevertheless would be an unprecedented intrusion into a sovereign state's fiscal affairs and could ultimately see Greece force to pay interest on its debt rather than its teachers, doctors or other government employees.

A Greek official indicated on Monday that "many problematic and unenforceable" elements were taken off the table, but declined to elaborate. The official was also speaking on condition of anonymity because the talks were ongoing.

The second big outstanding issue is how to make sure that the current efforts to save Greece can actually bring the country's debts down to a manageable level in the longer term. In October, eurozone leaders and the IMF said that Greece's debt should be reduced to around 120 percent of annual economic output by 2020, from above 160 percent currently.

But a new report prepared by the European Commission, the ECB and the IMF concluded that the new bailout, Athens' spending cuts and a planned euro100 billion debt relief from private investors would still leave Greece's debt at almost 129 percent of economic output by the end of the decade.