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EU to ease aid terms as Greeks back euro

James Neuger Brussels

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

A European official briefing reporters on condition of anonymity in Brussels yesterday said the first step would be when Greece’s still-to-be-formed government requested modifications to the e240 billion (R2.5 trillion) rescue programmes. This would lead to a revision of Greece’s economic performance targets sometime before September.

Europe floated the relief as the victor in the Greek election on Sunday, Antonis Samaras of the New Democracy party, accelerated preparations for a coalition government including his historic socialist rivals, Pasok, with a mandate to loosen the bailout constraints while keeping Greece in the euro.

“Agreement on a policy road map is the definitive point to form a government,” Fotis Kouvelis of the Democratic Left, the third part of the planned coalition, said in Athens yesterday. “The process is speeding up. It is possible that… within the day, a government can be decided.”

European officials shrouded possible tweaks to the programme 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 break-up – 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 said on Monday at a summit of Group of 20 leaders in Mexico.

“There can be no loosening on these reform steps.”

A number of finance ministers opposed giving Greece more time to meet targets for deficit reduction, structural reforms or the sell-off of state assets, the euro zone official said. Still, Greece’s deteriorating economy made it delusional to hew to the current conditions.

The Democratic Left set seven conditions for joining the new government, including extending the deficit-cutting timeline to 2017 from 2014 and reversing structural overhauls such as cuts to the minimum wage and pensions.

Pasok broadly agreed with those demands. – Bloomberg

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