The European Union's top economic official said today that negotiations over financial aid to free debt-stricken Greece from the pressures of money market attacks were 'about to conclude'.
Under terms and conditions hammered out 'day and night' over the past week, Greece will immediately come under tight Brussels scrutiny 'at every stage' of budgetary and broader economic reform in order to obtain financial aid from its EU partners, the EU commissioner for economic and monetary affairs Olli Rehn said.
'I cannot provide you with the details today but we are about to conclude the talks,' he said. 'I can assure you that the next time we meet, and that will be soon, I will give you all the details,' he added.
A Greek union official said the IMF had also asked Greece to raise VAT, scrap salary bonuses amounting to two extra months of pay in the public sector and accept a three-year pay freeze.
Experts from the commission, the European Central Bank and the International Monetary Fund are ready to nail down a three-year programme expected to cost €120 billion to give Athens a 'breathing space' to reform its budgetary practices and its economy.
Up to €90 billion of loans from euro zone partners within the EU 'will be conditional on implementing the decisions required at every stage to meet the conditions of fiscal consolidation and structural reforms,' Rehn said.
The Greek government has up to now been trying to push back some of the structural changes sought, over and above budget cuts, into 2011 and 2012 in the face of tough domestic opposition to its austerity programme.
Germany, meanwhile, has led EU calls for more extensive reform and cuts in Greece as a quid pro quo before it can provide any assistance.
The move to bail out Athens, which has seen its cost of borrowing shoot to record highs above 11%, almost twice the rate the EU will charge, is considered essential to prevent attacks on other weaker euro nations intensifying, as has been the case this week with Portugal and Spain.
The aid is 'not only for Greece but for every euro area country,' Rehn stressed, 'to safeguard citizens from contagious attacks by speculative investors on other countries and therefore 'absolutely crucial for our economic recovery'.
'I'm confident that the talks will be concluded in the next days,' he said. He said the outcome of the talks will be a multi-annual programme that will lead to a major fiscal and also structural adjustement.
Meanwhile, pressure on Greek borrowing costs resumed this evening, having eased off earlier. The yield on the 10-year Greek sovereign bond moved to 10.8%, having fallen to 9% earlier.
The rate, which indicates the interest the Greek government would have to offer to raise new money, shot up above 11% at one point yesterday as fears of Greek debt default gathered momentum.
Those fears remain, however, analysts said, pointing to continued high yields on Greek two-year bonds. The rate eased this morning to 14.911% from 16.066% last night.
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The euro zone must come up with a support package for Greece that curbs the threat of problems spreading to other countries in the bloc, European Central Bank President Jean-Claude Trichet said today.
Trichet said the euro zone needed to take firm action now to prevent the problems spiralling.
'What we need most at this time is a strong sense of direction. We need a sense of direction that can guide us on how we can emerge from these turbulent events,' Trichet said in a speech at the Munich Economic Summit.
He called for support that 'will avoid the materialisation of financial risks for the euro area as a whole'.
Trichet refused to comment on the details of talks in Athens between Greece, the EU, the International Monetary Fund and the ECB, but urged confidence and tough action.
'I am confident as regards the results of these discussions,' he said.
