Greek political leaders clinched a long-stalled deal on Thursday on harsh austerity measures and reforms required to secure a second international bailout in two years but the country's financial backers reacted sceptically. European Union partners and the International Monetary Fund have been exasperated by a string of broken promises and weeks of wrangling over the terms of a 130 billion euro ($172 billion) bailout, with time running out to avoid a chaotic default.
Finance ministers of the 17-nation euro zone arriving for talks in Brussels warned there would be no immediate green light for the rescue package and said Athens must prove itself first. "It's up to the Greek government to provide concrete actions through legislation and other actions to convince its European partners that a second programme can be made to work," EU Economic and Monetary Affairs Commissioner Olli Rehn said. German Finance Minister Wolfgang Schaeuble, whose country is Europe's biggest paymaster, told reporters: "You don't need to wait around because there will be no decision (tonight)."
Greek Finance Minister Evangelos Venizelos flew to Brussels after all-night talks involving Prime Minister Lucas Papademos, leaders of the three coalition parties and chief EU and IMF inspectors left one sensitive issue - pension cuts - unresolved.
A final 300 million-euro gap was bridged on Thursday in talks with the troika of the European Commission, the European Central Bank and the IMF, and endorsed by the party leaders. The euro and European stocks rose briefly on the news, which appeared to remove - at least for now - the risk of a hard default by the euro zone's most indebted country, facing a major bond redemption deadline on March 20. The risk premium investors charge for holding Italian, Spanish and Belgian bonds fell.
"We need now the political endorsement of the Eurogroup for the final steps," Venizelos told reporters. But several ministers arriving for the meeting made clear they wanted firmer guarantees and practical action first. "Greece has to implement what it has not implemented from the first programme before we can decide on a second," Germany's Schaeuble said. Venizelos said Athens also had an outline deal with private creditors on a bond swap in which they would give up some 70 percent of the value of their Greek bond holdings, reducing Athens' 350 billion-euro debt pile by about 100 billion euros.
ECB President Mario Draghi said he was "quite confident" that all the components of a Greek debt deal would fall into place and hinted the central bank could provide indirect help without breaching a treaty ban on financing governments. An IMF spokesman called the agreement "an important initial step" but said IMF managing director Christine Lagarde would seek assurances that Greece would stick to the agreed policies whatever the outcome of a general election likely in April.