Some European countries — Germany and the Netherlands chief among them — drew a hard line on giving Greece any more assistance if no plan was devised that got the country closer to the 120 percent goal.
“We can help, but we are not going to pour money into a bottomless pit,” German Finance Minister Wolfgang Schaeuble told German radio last week, jarring Greeks, who raised the specter of the Nazi occupation of their country.
Without the aid, Greece would be bankrupted when a $19 billion debt payment comes due on March 20. But because of the complexity of the deal, its outlines must be set far earlier.
Greece will have to allow a roughly two-week-long window for its bondholders to sign on to the plan to write down debt, and parliaments in Germany, the Netherlands and Finland will have to approve their countries’ contributions to the aid.
“It cannot wait any longer,” French Finance Minister Francois Baroin said Monday in an interview with Europe 1 radio.
But many Greeks question whether the terms of the bailout will do much to help their economy in the coming years, and the “troika” of the International Monetary Fund, European Union and European Central Bank acknowledged that the recession would worsen in the short run, even as unemployment has already spiked to 21 percent — 49 percent for those younger than 25 — and the economy contracted by 7 percent in the third quarter of 2011.
Europe has demanded that the public sector shrink by 150,000 people, that the minimum wage be lowered by 22 percent, that pensions be cut and that Greece do more to sell off its publicly owned companies, among other measures that filled a 50-page booklet.
When the Greek parliament started implementing them last week, 43 of the deputies in the ruling coalition rebelled, and rioters in Athens set dozens of buildings on fire.
European leaders, stung by the sense that Greek leaders failed to live up to the promises they made to qualify for the first bailout, have said they would channel new bailout funds into a special escrow account that Greece will be able to use only to make debt payments, not for its ordinary government expenses, in essence forcing Greece to prioritize its creditors over its own citizens. And they said they would increase their monitors in Athens to make sure Greece was meeting targets.
“I am in favor of more control, more supervision,” Dutch Finance Minister Jan Kees de Jager told reporters in Brussels on his way into the meeting. “Money is the thing we can control Greece with.”
Few expected this to be the last time officials gather in Brussels to discuss the country’s fate, even assuming the bailout proceeds without hiccups.
If Greece fails to take the difficult measures that are its end of the deal, Europe may be inclined to cut off the money, especially after a permanent bailout fund is set up in July that would do more to keep the pain of a Greek default isolated inside the country.
“The message that was sent by policymakers, especially in Germany, was that the price for keeping Greece in the euro zone is not infinite,” said Jean Pisani-Ferry, the director of Bruegel, an economic think tank in Brussels.