European governments wrangled over how best to keep Greece from defaulting on its mountain of debt, with one of them acknowledging for the first time that they had discussed a restructuring — a risky move to delay or cut debt repayments.
Monday's meeting was meant to focus on getting final approval for a euro78 billion ($110 billion) bailout for Portugal, but growing concern over Greece — and the arrest of Dominique Strauss-Kahn, the managing director of the International Monetary Fund — threatened to overshadow the talks.
Greece's debt is expected to grow and top 166 percent of economic output in 2013, as the country remains stuck in recession and struggles to get a grip on budget shortfalls. Most investors and analysts believe the debt load is so big, and the economy so weak, that only a restructuring will help it back on its feet.
On Monday, for the first time, a European finance minister conceded that a debt restructuring was being discussed.
"Of course we discuss all kinds of topics, including restructuring," Dutch Finance Minister Jan Kees de Jager said as he arrived at the meeting. "But in public, we are very reluctant about discussing and debating restructuring."
Although de Jager did not say whether his country favored a restructuring, his statement clashed with comments from other European officials, who have denied that restructuring was even considered as an option.
Greece was already granted euro110 billion ($156 billion) in rescue loans from other eurozone countries and the IMF last May, which was meant to keep it afloat for three years while it reformed its lackluster economy to get it growing again.
Athens was expected to start raising some money on international debt markets again next year to help pay its bills, but with interest rates for Greek 10-year bonds consistently above 15 percent, that prospect looks increasingly unlikely, leaving the government with a massive shortfall.
Several European officials have hinted over the past 10 days that a second bailout for Greece may be necessary, but only if the government was willing to undertake further reforms.
"At the moment it seems that Greece is not on the right track and it should be first brought back on the right track" before deciding on any new support measures, said de Jager.
Greece has to adopt further economic reforms and austerity measures and properly roll out its promised privatization program, de Jager said.
Experts from the EU, the European Central Bank and the IMF are currently in Athens to check on the implementation of the existing program and whether Greece will need any more funds.
Belgian's Finance Minister Didier Reynders said that as long as Greece shows clear willingness to engage in further measures, it should be possible to review its existing program without getting into restructuring, which he said would be "very catastrophic ... not only for Greece but for all the eurozone."
Reynders also downplayed the impact of Strauss-Kahn's arrest on Europe's crisis strategy, saying that the managing director of course had "some influence on the evolution of the dossier," but that ultimately all officials were working based on the same set of studies conducted by the experts of the ECB, the EU and the IMF.
He added that he hoped that Europe will nevertheless be able to appoint the head of the IMF in the future — as it has been since the fund's formation after World War II — despite growing demands from emerging markets who want more influence.
Other ministers declined to comment in detail on the incident in New York, saying that Strauss-Kahn should be presumed innocent until proven guilty.
AP
