European leaders expressed optimism on Friday that
Greece would secure a new rescue package worth 130 billion euros ($171
billion) though policy-makers admitted urgent work was still needed to
get its debt-cutting programme back on track.
Luxembourg's Jean-Claude Juncker, who will chair a crunch meeting of euro zone finance ministers on Monday, said efforts to slash Greece's debt from 160 per cent of output to a target of 120 per cent by 2020 were still "far away" from fruition.
"All the discussions I will have ... until Sunday night will try to move the figure nearer to the target," the head of the Eurogroup told reporters in his home capital.
Earlier, Greek caretaker Prime Minister Lucas Papademos talked to eurozone leaders to persuade Berlin and others to back bailout measures needed to stave off bankruptcy.
German Chancellor Angela Merkel, Italy's Mario Monti and Papademos all voiced optimism about an accord during a three-way conference call, Monti's office said.
The Greek premier also spoke to Dutch Prime Minister Mark Rutte and state television said he would pursue talks with eurozone partners "to create a positive mood in view of Monday's meeting and to dispel doubts that could thwart this agreement."
A brief message by Rutte on his Twitter account noted simply of the call with Papademos: "I have pointed out to him that the Greek people should comply with all demands to get a new programme."
Rutte's finance minister, Jan Kees de Jager, indicated on Thursday that the whole deal had been close to falling apart earlier in the week, saying that if a planned meeting of the Eurogroup of finance ministers had gone ahead two days ago, he and his German and Finnish counterparts would have voted against granting Greece more aid.
Mutual accusations of brinkmanship between Athens and other euro capitals have soured the atmosphere and strained ties within the single currency union as it faces its toughest challenge since euro notes and coins were introduced in 2002.
Negotiations were put back on track on Thursday when Athens set out the remaining cuts in a 3.3-billion-euro ($4.33 billion) austerity package whose passage through parliament triggered rioting and looting through central Athens last Sunday.
World stocks hit a fresh 6½-month peak on Friday and the euro gained ground as hopes Greece will seal a long-awaited bailout deal at Monday's meeting fuelled risk appetite.
But there are still question marks over whether the bailout will be enough to help Greece back on its feet after a debt crisis that has seen its economy shrink by 16 per cent from a 2008 peak, triggering mass unemployment and growing poverty.
"The skepticism is especially strong among the 'AAA' states over whether Greece will be able to make it," Germany's Der Spiegel magazine quoted Austrian Finance Minister Maria Fekter as saying of countries with top-notch credit ratings such as Germany, Finland and the Netherlands.
"The risk of a Greek insolvency is not off the table."
According to an assessment by the European Commission, the European Central Bank and the IMF, Greek debt will still be around 129 per cent of GDP in 2020 - higher even than the 125 per cent that most eurozone states would likely accept.
Luxembourg's Jean-Claude Juncker, who will chair a crunch meeting of euro zone finance ministers on Monday, said efforts to slash Greece's debt from 160 per cent of output to a target of 120 per cent by 2020 were still "far away" from fruition.
"All the discussions I will have ... until Sunday night will try to move the figure nearer to the target," the head of the Eurogroup told reporters in his home capital.
Earlier, Greek caretaker Prime Minister Lucas Papademos talked to eurozone leaders to persuade Berlin and others to back bailout measures needed to stave off bankruptcy.
German Chancellor Angela Merkel, Italy's Mario Monti and Papademos all voiced optimism about an accord during a three-way conference call, Monti's office said.
The Greek premier also spoke to Dutch Prime Minister Mark Rutte and state television said he would pursue talks with eurozone partners "to create a positive mood in view of Monday's meeting and to dispel doubts that could thwart this agreement."
A brief message by Rutte on his Twitter account noted simply of the call with Papademos: "I have pointed out to him that the Greek people should comply with all demands to get a new programme."
Rutte's finance minister, Jan Kees de Jager, indicated on Thursday that the whole deal had been close to falling apart earlier in the week, saying that if a planned meeting of the Eurogroup of finance ministers had gone ahead two days ago, he and his German and Finnish counterparts would have voted against granting Greece more aid.
Mutual accusations of brinkmanship between Athens and other euro capitals have soured the atmosphere and strained ties within the single currency union as it faces its toughest challenge since euro notes and coins were introduced in 2002.
Negotiations were put back on track on Thursday when Athens set out the remaining cuts in a 3.3-billion-euro ($4.33 billion) austerity package whose passage through parliament triggered rioting and looting through central Athens last Sunday.
World stocks hit a fresh 6½-month peak on Friday and the euro gained ground as hopes Greece will seal a long-awaited bailout deal at Monday's meeting fuelled risk appetite.
But there are still question marks over whether the bailout will be enough to help Greece back on its feet after a debt crisis that has seen its economy shrink by 16 per cent from a 2008 peak, triggering mass unemployment and growing poverty.
"The skepticism is especially strong among the 'AAA' states over whether Greece will be able to make it," Germany's Der Spiegel magazine quoted Austrian Finance Minister Maria Fekter as saying of countries with top-notch credit ratings such as Germany, Finland and the Netherlands.
"The risk of a Greek insolvency is not off the table."
According to an assessment by the European Commission, the European Central Bank and the IMF, Greek debt will still be around 129 per cent of GDP in 2020 - higher even than the 125 per cent that most eurozone states would likely accept.
The IMF has said that if the
ratio cannot be cut to around 120 per cent by 2020, it may not be able
to finance the second, 130 billion euro ($170.55 billion) program for
Greece. The Fund's own contribution has not yet been settled.
Officials have previously said a target of 125 per cent would be acceptable to most euro zone members but further measures will be required to meet even that goal.
Given that, policy-makers are scrambling to fill the gap.
Central bank sources told Reuters the ECB was studying whether to allow Greek bonds held in national euro zone central banks' investment portfolios to be subject to the same writedowns which private investors are due to take.
Eurozone central banks hold around 20 billion euros ($26.24 billion) of Greek bonds in their trad-itional investment portfolios. If they do take losses on those bonds it would provide an immediate lump sum for Athens of around 14 billion euros ($18.37 billion) if they take the same hit as their private counterparts.
One central bank source said it was "50-50" whether the deal would go ahead as an accompaniment to a debt restructuring offer which Greece will offer to private creditors as part of the wider rescue plan. The swap will mean the real value of bonds held by banks and insurers will fall by about 70 per cent.
Other ideas to help Athens meet its long-term debt targets include the euro zone cutting the interest rate on its existing bilateral loans to Greece; increasing the current offer of 130 billion euros ($171 billion) of government financing; and asking private investors to agree to bigger losses.
Officials have previously said a target of 125 per cent would be acceptable to most euro zone members but further measures will be required to meet even that goal.
Given that, policy-makers are scrambling to fill the gap.
Central bank sources told Reuters the ECB was studying whether to allow Greek bonds held in national euro zone central banks' investment portfolios to be subject to the same writedowns which private investors are due to take.
Eurozone central banks hold around 20 billion euros ($26.24 billion) of Greek bonds in their trad-itional investment portfolios. If they do take losses on those bonds it would provide an immediate lump sum for Athens of around 14 billion euros ($18.37 billion) if they take the same hit as their private counterparts.
One central bank source said it was "50-50" whether the deal would go ahead as an accompaniment to a debt restructuring offer which Greece will offer to private creditors as part of the wider rescue plan. The swap will mean the real value of bonds held by banks and insurers will fall by about 70 per cent.
Other ideas to help Athens meet its long-term debt targets include the euro zone cutting the interest rate on its existing bilateral loans to Greece; increasing the current offer of 130 billion euros ($171 billion) of government financing; and asking private investors to agree to bigger losses.
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