Dutch keep pressure on Greece to prove austerity mettle



(Reuters) – Greece needs to show it is capable of meeting the demands of its newly-agreed 130 billion euro rescue deal if it is to overcome its economic crisis, the Dutch Finance Minister said on Thursday.

Finance Minister Jan Kees de Jager, who took a particularly hard line during negotiations over the latest Greek bailout, gave a fresh warning that Greece’s poor reputation on keeping its austerity promises meant it needed to show it could implement agreed budget cuts and reforms.

“The package is no guarantee that the problems in Greece will be solved,” De Jager said in a letter to parliament.

“Greece will have to take extensive measures and show that it implements the necessary reforms,” De Jager said.

Tuesday’s package was “provisional” and subject to a Greek debt swap with private sector bond holders, reaching a target of debt sustainability, and implementation of measures to catch up with delays of the first Greek aid program, De Jager said.

“By the way, it is uncertain when Greece will again get market access, making it therefore impossible to rule out that Greece needs extra public sector support, as I have discussed earlier in Dutch parliament.”

De Jager has warned in the past week of the risks to the Greek rescue package from Greece’s past behavior and the possibility it may need further financial support when the current program ends.

“Because of Greece’s weak track record, several euro zone countries, including the Netherlands, were very worried about this. Therefore the Netherlands has strongly pushed for measures to promote discipline and implementation of the package,” De Jager said.

“Weak implementation of the program is an important downward risk to the debt sustainability.”

An International Monetary Fund official on Thursday said the fund also sees risks in the implementation of the new Greek package.

De Jager is in favor of merging the euro zone’s temporary EFSF rescue fund with its permanent ESM mechanism to raise their combined firepower to 750 billion euros, he said in an interview with a French newspaper published on Wednesday.

As agreed in Tuesday’s support package, monitoring in Greece will be improved by stationing a larger number of people permanently in the country, De Jager said in the letter to parliament.

“In this manner progress can be followed more closely and potential problems detected earlier,” De Jager said.

Once Greece offers its bond holders a debt swap, credit rating agencies will place it in selective default and the European Central Bank will need guarantees for Greek bonds it holds as collateral, De Jager said.

“The temporary ECB guarantee will then be provided as quickly as possible and will be around the earlier-mentioned 35 billion euros,” he said.

A eurogroup meeting is planned for March 1 to determine the progress of the Greek debt swap and implementation of measures to catch up delays of the first Greek aid program, De Jager said.