An influential member of Germany's governing coalition backed the possibility on Tuesday of easing the terms of Greece's eurozone bailout, a move that might help Athens better weather the debt crisis. Michael Meister, deputy parliamentary leader of Chancellor Angela Merkel's Christian Democrats, said he saw logic in extending the repayment schedule for the 110 billion euros of loans granted to Greece on May 2, 2010.
--- Portugal bailout negotiations seen concluding this week
--- Doubts remain over Finland's backing for Lisbon aid
His intervention followed European Central Bank policymaker Nout Wellink, who said on Monday he was open to the idea of extending maturities on all Greek debt, becoming the first senior ECB official to admit the possibility of a restructuring publicly. Greece's finance minister said on Monday he hoped Athens might get more time to repay the EU/IMF bailout loans - already extended from three to seven years - at a lower interest rate.
European Union and IMF inspectors are in Greece to assess whether the country's new austerity plans are tough enough, a review that could determine whether the loan terms are changed. If they were to be altered, it could help Greece better manage its massive sovereign debt pile, which is set to rise to 340 billion euros, or 150 percent of annual output, this year.
Without a massive pick up in growth or one-off income from privatisation's, Greece is not expected to be able to finance its debts, which means a restructuring of some kind or another is probable. That would alarm bondholders, who include many major French and German banks and the European Central Bank - 70 percent of Greece's debt is owned by foreign institutions.
Two German government advisers said last week a Greek restructuring was inevitable, and financial markets appear to hold a similar view. Yields on Greek 2-year government bonds now stand around 25 percent - an unsustainable figure that implies Greece cannot finance itself without at least rescheduling some repayments.
Under the umbrella "debt restructuring" there are various options, ranging from writing down the value of the debt by a set amount, known as a haircut, to rescheduling when the debt will be repaid, which is a softer form. In Portugal, EU and IMF experts are expected to wind up nearly three weeks of negotiation over Lisbon's bailout in the next day or two, sources in Portugal said.
Euro zone officials say Portugal is likely to need about 80 billion euros of assistance, but Portuguese newspaper Diario Economic reported on Tuesday the figure could be greater than 100 billion euros ($148 billion), including up to 10 billion euros in aid for Portugal's banks.
The newspaper did not cite any sources but said the banking sector needed at least 5.3 billion euros to cover a hole left by the failure of BPN, a bank nationalised in 2008, as well as additional funds to help banks raise their capital ratios. Officials in Brussels have described Portugal's bailout as more complicated than either that of Ireland, which received 85 billion euros last November, or Greece, which agreed its 110 billion euro programme on May 2, 2010.