German Chancellor Angela Merkel signaled that European Union leaders may be ready to renegotiate the terms of Greece’s bailout as part of a broader package to shore up confidence in the euro.

“There certainly is a discussion about whether to consider extending the running time of the Greek program,” Merkel said, noting that last year’s aid plan for Greece was limited to three years while Ireland’s bailout package, agreed last November, runs for seven years. “It’s one point that’s on the table.”
Merkel, speaking to reporters in Berlin after talks with Greek Prime Minister George Papandreou late Tuesday, said that any extension would have to be a part of the comprehensive package to fight the debt crisis being negotiated for next month’s EU summit. No decision has yet been made on such action, she said.
The comments by Merkel, the leader of Europe’s biggest economy, are the first indication the EU may respond to calls to ease bailout conditions for indebted countries. Papandreou used a speech in the German capital on Feb. 21 to urge backing for lowering interest rates on bailout loans. Ireland’s main opposition leader Enda Kenny traveled to Berlin last week to tell Merkel of the need for Ireland to have similar relief.
There is a “need to work within the European Union to strengthen some of the mechanisms of financial support for countries which experience crisis,” European Central Bank Executive Board member Lorenzo Bini Smaghi said on Tuesday in a speech in Hong Kong.
---------------To be done
Greece’s debts are likely to be more than 156 percent of gross domestic product when a 110 billion-euro ($150 billion) EU-led aid package runs out in 2013, according to EU forecasts. Greece pays about 5 percent for European aid.
Merkel praised debt-cutting and austerity measures by Papandreou’s government, saying the “path is not easy.”
“Greece has started to put its house in order,” Merkel said. Even so, “quite a bit still needs to be done.”
Papandreou compared the Greek debt-cutting program to “a sprint,” saying his government is committed to seeing it through to avoid Greece having to restructure its debt.
The task will be easier “if the Greek people can be convinced that their sacrifices are not in vain,” he said.
EU leaders are working to finish a comprehensive plan to stem the crisis by a summit in Brussels on March 24-25. Germany will present initial proposals at a special summit called for March 11, and improving European competitiveness will be a “central theme,” Merkel said.
“Europe must become more competitive and everyone has a duty to stabilize the euro,” she said.
(Source: Bloomberg)