By Jack Duffy

WROCLAW, Poland (MNI) – European finance ministers concluded their
meeting here Saturday with Greece hanging in suspense about whether it
will receive an E8 billion tranche of official aid that is needed to
save it from bankruptcy.

Privately, policymakers admitted that the meetings had not
accomplished a great deal on Greece, with everyone awaiting the word of
so-called troika — inspectors from the European Central Bank, the
International Monetary Fund and the European Commission — whose stamp
of approval on Greek fiscal reform efforts is needed in order for the E8
billion to be released.

While officials made progress on a number of lesser issues ranging
from Finland’s demand for collateral to strengthening economic
governance, their action on Greece was seemingly limited to lecturing
the Greek finance minister, Evangelos Venizelos, and accepting his
promises to do better.

“If you want to be in the club you have to obey the rules,” said
Luxembourg’s finance minister Luc Frieden on the margins of the meeting
Saturday, echoing a widely-held view here. “I believe this message was
understood” by Greece, he said.

One EU official said the meeting of Eurozone finance on Friday was
“particularly harsh and unpleasant” for Venizelos. Some countries were
“aggressive” and even insulted Venizelos, this official said. “Thank God
he was able to keep his calm.”

According to the official timetable, the troika will deliver its
assessment by the end of the month on whether Greece deserves the new
aid money. The 17-nation Eurogroup will then meet on Oct. 3, and if its
decision is positive, the funds could be disbursed to Greece by October
14.

To secure a positive assessment from the troika, Greece has vowed
to come up with E7 billion in additional spending cuts, sources said.
Additional reforms demanded by ministers here included speeding up the
privatization program and cutting the wages of thousands of
public-sector workers, according to Greek media reports.

“We will decide on the disbursement of the funds based on the
assessment of the troika,” said Eurogroup president Jean-Claude Juncker,
offering perhaps the one statement that virtually all policymakers here
were prepared to make on the record.

Germany’s Finance Minister Wolfgang Schaeuble went further, saying
“the situation is not that urgent” because its creditors have “freed
Greece well into next year from the need to refinance on financial
markets.”

Asked by one reporter at his Saturday briefing whether the Eurozone
would pony up the money for Greece regardless of compliance because
authorities fear a Greek insolvency like the devil fears holy water,
Schaeuble countered, “I don’t know how much the devil fears holy water.”

However, private many officials admitted that given the extreme
market turbulence that could ensue if Greece’s Eurozone partners allowed
it go bankrupt, the troika will probably find the necessary rationale to
allow the aid tranche to be disbursed, even if targets are missed.

On other issues, ministers appeared to make progress on the Finnish
collateral dispute here. Finland has refused to participate in the
second Greek bailout unless it is given collateral for its part of the
deal. In a compromise that appeared to be emerging as the meeting ended,
ministers agreed that some form of collateral would be given to
countries demanding it, in return for those countries accepting a lower
interest rate on their loans to Greece.

“If you ask for a collateral guarantee, you have to pay a price,”
Belgian finance minister Didier Reynders said in a briefing. He added
that the price would be high enough that most countries would probably
forego the collateral.

Finnish finance minister Jutta Urpilainen has said that a
collateral deal must be in place before she will submit the second Greek
bailout package to the Finnish parliament in mid-October.

Meanwhile, estimates of the participation rate in the E135 billion
private sector Greek debt swap continued to creep higher, although
officials warned that no official numbers would be available before
October. The Belgian and French finance ministers said participation
among investors in their countries was above 90%. Officials said overall
participation appeared to be around 75%, still below the 90% level
Greece has said it needs in order to consummate the deal.

Finally, ministers approved a draft compromise proposal on a
package of laws to strengthen fiscal governance and economic cohesion in
the Eurozone.

The so-called “six-pack” rules will tighten the criteria EU
countries must meet for debt levels and deficits. For the first time, it
there also will be macroeconomic criteria — on current account balances
— and countries with large surpluses will be targeted as well as those
with large deficits.

The rules call for sanctions to be automatically imposed on member
states that fail to comply with budget targets and include beefed up
surveillance measures.

The European Parliament is expected to vote on the measures by the
end of September.

Policymakers had little new to say on the real economy since the G7
meeting of the previous week in Marseille and the ECB’s monthly press
conference just prior to that.

Most were downbeat. ECB President Jean-Claude Trichet noted the
predominance of downside risks and observed yet again that his central
bank’s forecasts had been revised down, while EU Economic and Monetary
Affairs Commissioner Ollie Rehn underscored the “significant” lowering
of the Eurozone’s growth profile and the worsening of financing
conditions.

Governing Council member and Bundesbank President Jens Weidmann,
however, reiterated his view that pessimism about the economy is
“exaggerated in part.” He argued that while a slowdown of growth is
indeed occurring, it is also due to temporary factors.

All of the officials present rejected the idea of additional fiscal
stimulus in Europe. with Rehn bluntly calling such measures as “not
appropriate for the European economy.” His comments followed a meeting
with U.S. Treasury Secretary Timothy Geithner, who had hoped to persuade
his counterparts on this side of the Atlantic to ease their position on
the subject.

— Paris newsroom, +331-42-71-55-40; jduffy@marketnews.com
–David Barwick and Angelika Papamiltiadou contributed to this report

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