Eurozone meets as clock ticks on Greece bailout

Greek Prime Minister Lucas Papademos flew into Brussels to join the talks among eurozone finance ministers and secure a 130-billion-euro ($171 billion) bailout and a writedown on privately-held debt worth 100 billion euros.

"We have all the elements for an accord," French Finance Minister Francois Baroin told Europe 1 radio ahead of the 3:30 (1430 GMT) talks. "That is what I will argue as finance minister this evening."

The negotiations have lasted for six months and have been on a knife edge in the last few weeks, with Greece appearing to totter between a rescue and even eviction from the eurozone.

Most analysts consider that if Greece were to default, the consequences for the Greek people would be catastrophic, but possibly not now so dangerous for the rest of the eurozone as would have been the case last year.

The bond swap with private investors would be launched on Wednesday, right on time for Athens as it faces debt repayments of about 14.5 billion euros on March 20.

Hoping to end fears that Greece could leave the eurozone, eurozone finance ministers are expected to inject another 130 billion eurozone in support for Greek banks, guarantees covering the weeks\'-long bond exchange and cash loans to Athens.

But full delivery, as well as IMF assistance, will be contingent on Greece enacting deeply unpopular spending cuts and reforms ordered by the European Union and International Monetary Fund which have come to mistrust Greek promises.

Thousands of people protested in Athens and Thessaloniki on Sunday, one week after rioters set fire to buildings in the Greek capital to protest new cuts approved by the parliament.

In Washington, US Treasury Secretary Timothy Geithner welcomed the austerity measures agreed by the Greek coalition and said the United States backed the idea of a new IMF loan for Athens.

"We welcome the program of economic reforms agreed to by the prime minister of Greece and the coalition parties, and the public statement of support from the major economies of Europe," Geithner said Sunday.

The Group of 20 major economies will meet later this week in Mexico seeking to boost IMF lending resources.

"Luckily, Greece is no threat to the world economy," European Central Bank executive board member Joerg Asmussen told the Financial Times Deutschland.

"Nevertheless, other countries expect us to find a solution. But by the G20 meeting at the end of the week, we\'ll be a great deal further" towards one, he said.

After weeks of what officials said was "deliberate pressure" to get the ruling class in Athens to change its economic mindset, the new bailout has been likened to the aid equivalent of a hospital drip.

Germany and The Netherlands still need to get the second bailout past sceptical parliaments.

A small army of EU officials is building up in Athens to make sure Greece delivers on pledges including a 22 percent reduction in the country\'s minimum wage and a 12-percent cut to pensions of more than 1,300 euros a month.

EU partners see Greece as the victim of chronic financial mismanagement by dynastic political forces -- what Italian Prime Minister Mario Monti last week called a "perfect catalogue" of errors.

But the Italian government said on Friday that German Chancellor Angela Merkel, Monti and Papademos were "confident that a deal can be reached" on Monday.

Both Italy, and Spain where hundreds of thousands of anti-austerity protesters took to the streets on Sunday, risk renewed financial-market contagion if the deal breaks down.

Parking the Greek problem to one side would allow eurozone leaders to focus on building a financial firewall for the currency as a whole at a March 2 eurozone summit.

After fresh protests in Athens too, the sense Greece is effectively being placed under wardenship remains sensitive, ahead of a general election in April.

But eurozone partners say surveillance of day-to-day management on the ground is critical after the failure of an initial 110-billion-euro EU-IMF rescue package approved nearly two years ago.

On top of 3.2 billion euros in the latest spending cuts, Greece agreed to open an "escrow" account to ensure repayments to government creditors, with just enough "incentive," as one source said, to encourage taxation reform and privatisations.

With debt reduction targets having veered off course and Greece now in a fifth year of recession, a senior official told AFP there was a 5.5-billion euro hole in the headline sums first agreed in October.

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