BRUSSELS - Greece's prime minister rushed to Brussels on Sunday, a day before eurozone finance ministers have to decide whether his country will get a €130-billion ($170-billion) bailout and avoid a potentially devastating default.
Leaders from Germany, Italy and Greece have said they are optimistic that the deal on a second massive bailout for Athens can be clinched at the meeting after months of delay, but critics have expressed doubts over Greek political leaders' commitment to austerity and there are still difficult details to be ironed out.
Pressure is on Greek Prime Minister Lucas Papademos to seal the deal and his presence in Brussels could lend more weight to the country's efforts and promises.
Monday's meeting could "result in the need to take very important decisions for the country and require immediate and thorough consultation between the Prime Minister and Minister of Finance," Papademos' office said in a statement. He is also expected to hold talks with representatives of Greece's private creditors on a related €100-billion debt relief deal.
Greece is straining to secure the rescue loans and the debt relief deal quickly to avoid defaulting on a €14.5 billion bond redemption on March 20. The government has already pushed a massive austerity and reform package though parliament and is expected to introduce in Parliament on Monday two more pieces of emergency legislation — including wage and pension cuts. There were scattered protests over the cuts in Athens on Sunday and about 60 people detained.
High-level finance ministry officials from the 17 countries that use the euro as their currency were already meeting in Brussels Sunday to evaluate Greece's latest austerity plans, as well as whether the new bailout and a related debt-relief plan could bring the country's debt down to a sustainable level.
Before the rest of the eurozone and the International Monetary Fund can sign off on Greece's new rescue package, which was tentatively agreed to in October, and comes on top of a €110 billion bailout granted in 2010, several issues have to be resolved:
Germany and other rich euro countries want Greece to set up a separately managed account that would ensure that the country services its debt. The idea of such an escrow account is that it would maintain pressure on Greece to stick to promised austerity and reform measures, without the eurozone risking the destabilizing effects of a default.
The escrow account would give legal priority to debt and interest payments over paying for government services. However, it is still unclear whether only funds from the bailout would be funneled into the account or whether Greece will also be expected to pay in some taxpayer money.
"There is agreement within the Eurogroup that there will be such a special account, or 'escrow account' in jargon, for the disbursement of the second aid package," German Finance Minister Wolfgang Schaeuble told German daily Tagesspiegel's Sunday edition. "The account ensures a priority for debt reduction."
But a European Union official said forcing Greece to also channel government revenue into the escrow account "is not off the table." He was speaking on condition of anonymity because the talks among finance ministry officials were still going on.
Such a requirement would be an unprecedented intrusion into a sovereign state's fiscal affairs and could ultimately see Greece force to pay interest on its debt rather than teachers, doctors or other government employees.
The European Commission, the EU's executive arm, prepared several proposals for an escrow account for Sunday's and Monday's meetings. However, the IMF does not like the idea of such an account, the official said.
The second big outstanding issue is how to make sure that the current efforts to save Greece can actually bring the country's debts down to a manageable level in the longer term. In October, eurozone leaders and the IMF said that Greece's debt should be reduced to around 120 per cent of annual economic output by 2020, from above 160 per cent currently.
But a new report prepared by the Commission, the European Central Bank and the IMF concluded that the new bailout, Athens' spending cuts and a planned €100 billion debt relief from private investors would still leave Greece's debt at almost 129 per cent of economic output by the end of the decade, a European official said Thursday. The official was also speaking on condition of anonymity because the report is confidential.
There is hope that the ECB and national central banks could help close a big part of that financing gap by forgoing profits on their own holdings of Greek government bonds, but the bank has so far not announced a clear plan to that effect.
A cut in the interest rate Greece has to pay on its first bailout could also contribute to reaching the 2020 target.
Another issue due to be discussed Monday is how much the IMF will contribute to the new rescue. The Washington-based fund has provided one-third of the bailouts for Ireland and Portugal and chipped in €30 billion for Greece's first €110 billion rescue. But this time around, it looks as if the IMF will put up much less than one-third.
"The indication is that the figure will be rather low," the EU official said, but added that a final decision from the fund's board is still outstanding. IMF Managing Director Christine Lagarde will also be at the Brussels meeting Monday.
Greece has already passed a far-reaching new austerity and reform package through Parliament despite violent protests. In addition to that, the leaders of both main parties have signed written pledges promising to implement the measures even after elections expected in April.
On Monday, Papademos' government introduces legislation mean to supplement the 2012 budget and make sure that a total of €3.2 billion in savings can be achieved. It is expected to be debated in committee Tuesday and submitted to a vote Wednesday. A separate legislation will provide for permanent pension cuts.
More actions — including measures passed last July but never implemented — must be approved by the end of February. These include slashing the wages of some special categories of employees, such as special advisers to the government, as well as professionals, such as lawyers.
Also,the government must shut down some more state agencies and update the list of pharmaceuticals approved by the National Health Service. A Sunday newspaper, To Vima, estimated that by the end of the month the government must pass some 79 laws and ministerial decrees to comply with the creditors' demands.
"It's difficult (for Greece) to go beyond what's been agreed," the EU official said, adding that it will be mostly up to the eurozone and the ECB to decide how to close the financing gap it the new program. "Ninety per cent is done so there is no reason to think that there should be bad news on Monday," he said.
In Athens, a morning gathering called by Greece's two main union confederations attracted fewer than a thousand protesters. Separately, there were a few scuffles when about a hundred youth threw stones at riot police outside Parliament.
Several dozen "angry bikers" paraded through central Athens earlier Sunday afternoon honking their horns. Unionists affiliated with the communist party will hold their own protest rally and march to parliament Tuesday.
Demetris Nellas reported from Athens, Greece. Juergen Baetz in Berlin contributed to this story.