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Tactical Redeployment With A Smaller Package-Loan For Athens

The European Working Group – a subcommittee of Economic and Financial Committee- convenes on Tuesday in Brussels to examine a proposal on principle to address the debt crisis in Greece. 

This proposal, which has been prepared by a special committee of technocrats, a “Task Force” set up for the Greek issue, is developing to mixed pattern including:

-a loan of about €30-35b combined with

-a package of voluntary holding of Greek government bonds, maturing in the period 2012-2013, a variation of the initiative of Vienna, which had been applied to Eastern European countries a few years ago,

-increasing revenues in 2011-2012 through the privatization package, which should be finalized within the week. 

It is not certain, however, that these procedures would be completed in time in order to convene an extraordinary meeting of Eurogroup next Monday for the final decisions to be approved at the EU Summit in June. 

Diplomatic sources in Brussels note that despite the efforts, there is a possibility that such a solution might not be ready for the Summit in June. 

Meanwhile, EU seems to revise the tactics of intense pressure with public statements towards Greece, as the results are evaluated positive only partially. 

Sources told that the policy to exercise public pressures was intended to push Greek opposition parties to a sentiment of consensus and create an environment of market acceptance for a program of holding Greek bonds, maturing in 2012-2013 under European supervision and guarantee.  

In the first part, the pressure has failed following the rejection of an agreement by the opposition, while in the second part there is a cautious but positive response, according to sources. 

However, these tactics caused great tension in both Greek banks through the withdrawing of deposits by small savers in particular, and the political system as the social reactions swell, leading German reporters to speak of pre-revolutionary situation. 

This climate is causing growing concern in Brussels and the EU has informed the other member states. 

Diplomatic sources said that the tactics had reached dangerous situations and redeployment with reassuring statements should be expected to defuse the tension in both the markets and the Greek society. 

In this context, both the Greek government and the IMF prejudice on smooth developments and not a negative review by the troika.
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