New Greek bailout cash comes with dire warning

International inspectors forecast Greek debt will reach 181 per cent of GDP

European leaders were given a stark warning last night that Greece's debt burden remains unsustainable, despite the €65bn (£57bn) in bailout funding the country has received since May 2010. The warning was contained in the draft text of the decision of the "troika" mission of officials – from the European Central Bank, the International Monetary Fund and the European Commission – on Athens' progress towards stabilising its public finances.

The troika comes as close as it can, given the political contraints under which the mission operates, to saying that the existing bailout strategy for Greece is not working. And the warning will heap pressure on European leaders to agree on significant levels of debt relief for Greece at the weekend's summit in Brussels.

The text of the report, parts of which leaked out last night, reveals that the nation's debt position remains "extremely worrying". It also contains a forecast that Greek debt will hit 181 per cent of GDP next year. The draft report says that "when compared with the outlook of a few months ago, the debt sustainability has effectively deteriorated".

German politicians have been pushing for the face value of Greece's debt to be written down by more than 50 per cent, in order to ensure that private banks contribute to the cost of bailing out the country. In July the banks agreed to reduce the face value of their holdings of Greek debt by 21 per cent, but in recent weeks financial lobbyists have been warning against further write downs.

Despite the bleak outlook for Greece's public finances, the troika recommends that the next €8bn aid tranche should be paid to Athens "as soon as possible". The government of Prime Minister George Papandreou will run out of money early next month unless those aid funds are delivered, which would result in a disorderly default by Athens and a catastrophic shock to the European banking system.

It also emerged yesterday that European governments are close to agreement on the scale of the recapitalisation needed for the continent's banks. "It's about €100bn that is needed for recaptialisation," the Austrian finance minister, Maria Fekter, told a conference in Vienna.

Global financial markets experienced heavy sell-offs yesterday, prompted by signs of disagreement among European leaders over the European rescue package. The German DAX fell by 2.49 per cent, the French CAC lost 2.32 per cent and the FTSE 100 finished 1.21 per cent down.

While the Greek troika's report made for disturbing reading, another bailed out eurozone state, Ireland, received a largely optimistic report from its own team of international inspectors yesterday. The Irish troika report, unveiled in Dublin, said Ireland's fiscal implementation "continues to be strong".

Start your day with The Independent, sign up for daily news emails
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Ashdown Group: Marketing Services Manager - (communications, testing, DM)

£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

Guru Careers: Finance Account Manager

£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas