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The Euro sculpture in front of the headquarters of the European Central Bank (ECB) in Frankfurt (JOHN MACDOUGALL)
The Euro sculpture in front of the headquarters of the European Central Bank (ECB) in Frankfurt (JOHN MACDOUGALL)

SOVEREIGN DEBT CRISIS

Europe pressured to revise Irish, Greek bailouts Add to ...

The European Union is under pressure to renegotiate its financial bailouts of Ireland and Greece after an Irish minister said any concessions given to Athens should mean better terms for Dublin, too.

The €110-billion ($157-billion U.S.) rescue of Greece, agreed in May last year, and the €85-billion scheme for Ireland, put together in November, were meant to be the cornerstones of the euro zone's response to its sovereign debt crisis.

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The fact that both may now be revised, in Greece's case perhaps radically, underlines how they so far have failed to convince markets that the problems are in hand, and suggests Europe may be on the hook to supply fresh aid for years to come.

Irish Minister for Energy Pat Rabbitte told state broadcaster RTE on Sunday he would like to see a rescheduling of the emergency loans extended to Ireland under the bailout by the European Union and the International Monetary Fund.

"Quite frankly the [interest]rate on Ireland must be reduced and, in my own view, the debt must also be rescheduled, but that's another issue," Mr. Rabbitte said.

He said Ireland intended to continue negotiating improvements in the bailout terms throughout the scheme's three-year life.

Mr. Rabbitte said this would make sense in light of the situation in Greece. After a secretive meeting of top euro zone finance officials in Luxembourg on Friday night, Jean-Claude Juncker, chairman of the zone's finance ministers, said there was consensus that Greece needed a new plan.

"We think that Greece does need a further adjustment program," Mr. Juncker said after talks with the finance ministers of Greece and the zone's biggest economies: Germany, France, Italy and Spain.

"This has to be discussed in detail and will be taken up at the next Euro group meeting on May 16," Mr. Juncker said, referring to a conference of finance ministers of all 17 euro zone states.

British Finance Minister George Osborne agreed on Sunday that Greece might need additional aid but said Britain, which is outside the euro zone, should not have to provide any. He acknowledged that markets doubted Greece could meet the requirements of its current rescue plan.

"The market is quite skeptical about that happening and I suspect a lot of my time over the next few weeks is going to be with other European finance ministers talking about how we try to help the Greeks get through this situation," he told the BBC.

Any renegotiation of the financial terms or economic targets in the Greek and Irish schemes could complicate the rescue of Portugal, which last week became the third euro zone state to agree on an EU/IMF bailout.

Portugal's main political parties have committed themselves to supporting the €78-billion plan after elections on June 5 produce a new government. But if Greece and Ireland are allowed to renegotiate their bailouts, it may be hard to deny Portugal the same opportunity if a future government in Lisbon decides that is necessary.

A revised Greek plan could include pushing further into the future the targets for Greece to cut its budget deficit, easing the terms of its emergency loans, and giving it additional money, EU official sources and analysts say.

Publicly, officials in Athens and around Europe continue to insist that restructuring the Greek government bonds held by private investors is not in the cards. But privately, officials increasingly concede that some form of restructuring - perhaps an extension of maturities on the bonds - may be inevitable.

Any restructuring of Greek bonds would fuel speculation about similar action for Ireland and Portugal. The Irish Mail on Sunday reported, quoting an unnamed senior minister in Dublin, that Ireland's government expected the country's debt would be restructured within the next three years.

Euro zone governments are desperate to rescue the bloc's weakest states for fear that a chain reaction of debt defaults could savage the region's banking system. But with taxpayers in rich countries angry about having to pay for the poor countries, it may be hard for all 17 euro zone states to agree on more generous bailout terms.

Governments in some of the smaller countries were irritated when Germany and France privately agreed among themselves last year to push through some crisis steps, and there were signs that Friday's secretive Luxembourg meeting among a handful of countries also was resented.

Officials from the Netherlands, the fifth-biggest euro zone economy, were not invited to Luxembourg and the Dutch government faced domestic criticism over the weekend for its exclusion.

"It is a humiliation and an insult that the Netherlands is being bypassed for talks about Greece," anti-immigration and euro skeptic member of parliament Geert Wilders told ANP news agency.

Dutch Finance Minister Jan Kees de Jager was assured by the French and German ministers that nothing was decided on Friday and that the Netherlands will have input into any future decisions, a ministry spokeswoman said.

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