BRUSSELS, Belgium - Greece has made progress convincing the rest of the eurozone that it should get a C130 billion ($170 billion) bailout -- but the country's austerity efforts will need much tighter surveillance, the chairman of the eurozone's finance ministers said Wednesday.
During a 3 1/2 hour conference call between the finance chiefs of the 17 countries that use the euro, the ministers received assurances from Greece that it had found a further C325 million in cuts on top of austerity measures already agreed.
They also welcomed written commitments from the leaders of the two Greek parties that make up the coalition government to implement promised cuts and reforms even after elections expected in April.
However, in a sign of the deep distrust that has built up -- especially among rich euro nations like Germany, the Netherlands and Finland -- Jean-Claude Juncker, the prime minister of Luxembourg who also chairs the finance ministers' meetings, said better surveillance mechanisms had to be set up before new aid could be released.
"Further considerations are necessary regarding the specific mechanisms to strengthen the surveillance of program implementation and to ensure that priority is given to debt servicing," Juncker said.
The statement appeared to be a reference to a Franco-German proposal to set up an account, separate from Greece's general budget, that would be dedicated to paying off Greece's massive debt. It was unclear whether this account would only manage the bailout money or whether government revenue could also be funneled into it.
Such an account would give the eurozone more control over what Greece does with its money, after the country has repeatedly missed budget, reform and privatization targets over the past two years. However, it would also constitute an unprecedented interference into the fiscal affairs of a sovereign state in Europe.
The European Commission, which is in charge of economic surveillance in the European Union, is now working on a specific proposal for such an escrow account, which will be present to the ministers at a meeting on Monday.
A German government official described the conference call as "intense and at times very technical." He said the participants received information on some of the debated topics only minutes before the call started, "which because of the short notice couldn't be verified and evaluated in detail."
The official said no minister challenged the idea that surveillance had to be strengthened and that paying off Greece's debts should have priority. He was speaking on condition of anonymity to discuss the confidential discussion between ministers.
The finance ministers held their conference call amid doubts in some countries over whether the C130 billion package of rescue loans, which comes on top of a C110 billion rescue granted in May 2010, can ultimately save recession-ridden Greece.
Yet, despite rumours that the bailout could be delayed until after the elections, Juncker said he expected the finance ministers "to be able to take all the necessary decisions" at their next meeting on Monday.
The second bailout is also tied to a C100 billion debt-relief deal with bondholders, under which the private creditors will swap the bonds they hold for ones with lower values and longer maturity dates.
Greece does not have much time to secure the bailout and implement the bond swap with investors because it risks defaulting on a C14.5 billion bond redemption in late March.
In Athens, Greek Finance Minister Evangelos Venizelos said all the issues concerning covering this year's austerity targets were clarified during Wednesday's conference call.
The written commitments from party leaders, the passage of a new austerity bill in Parliament over the weekend with a two-thirds majority and legislation regarding labour reforms were "a credible response to all those in Europe who doubt our ability to implement the program and to continue its implementation after the coming elections," Venizelos said.
But he added that the discussion also focused on the political and social situation in Greece, where two years of harsh cuts have led to frequently violent demonstrations.
In an appeal for unity among political parties and society in general, Venizelos insisted implementing the austerity was the only possible way forward.
"Those who support ... another solution, but don't say what that solution is, or those who support a solution of an exit from the euro, return to the drachma, a solution of a default, are not offering any help to the Greek citizen," he said. "Those who criticize us because we are taking difficult decisions by cutting salaries and pensions, or reducing income and living standards, do not understand that with their reaction, their blind and myopic reaction, they are endangering the income, the pensions, the salaries, living standards, which can suddenly collapse."
Opposition to the bailout program isn't coming only from within Greece.
Some European politicians have grown tired of Athens repeatedly missing budget targets and failing to implement promised cuts, reforms and sales of state assets. There are also concerns that the second bailout may not be enough to lift Greece out of its steep recession -- its economy shrank 7 per cent in the final quarter of 2011 from a year earlier.
"There are many in the eurozone who don't want us any more," Venizelos told the country's president, Karolos Papoulias, earlier in the day.
Greece, Venizelos added, had to persuade the skeptics that the country could stay in the currency union and regain lost ground in reforming its economy.
"We are facing a situation that is particular because we are constantly being given new terms and conditions," he said.
But in Berlin, German Chancellor Angela Merkel's spokesman, Steffen Seibert, sharply rejected a question about market rumours that Germany has decided a Greek bankruptcy is acceptable.
"I can say very clearly for the German government that these rumours are wrong -- there is no such decision by Germany," he said.
