The many hurdles holding up new Greek bailout

(BRUSSELS) - Eurozone finance ministers re-convene Wednesday in Brussels to examine whether Greece met conditions for a second bailout.

Athens faces many hurdles ahead of a crunch repayment deadline on March 20. Here are the key issues holding up the deal:

FINANCIAL AID

If it became reality, the new bailout would be the biggest in history.

It includes a write-down of privately-held Greek sovereign debt, called private sector involvement (PSI), intended to be worth 100 billion euros ($132 billion); 100 billion of loans from eurozone partners, heavily conditional; and 30 billion to keep Greek banks afloat.

Thereafter, the International Monetary Fund has to say what it will contribute, apart from auditor and "monitoring" expertise on the ground in Athens. In the May 2010 bailout that set the paramaters for subsequent rescues of Ireland and Portugal, the IMF added roughly one euro to every two-to-three EU partners loaned out.

But the IMF's reserves are now limited compared to the size of the problem should contagion spread again to Italy, Spain or other bigger eurozone states. G20 countries are talking about boosting loans to the Washington-based emergency lender, but negotiations are proceeding slowly with the United States -- whose deficit just this year is of a level with Italy's entire, cumulative debts -- refusing to up its share of funding.

CONDITIONS

Getting its hands on money promised in October last year is proving hard for Greece.

Apart from concluding a PSI agreement, Athens has had to vote through successive budgetary adjustments to account for "slippage" on deficit targets amid a deepening recession -- exacerbated, protesters say, by austerity policy.

And there remains the unresolved question of a promised 50 billion in revenues from privatisations. The Netherlands, among eurozone hardliners, remain angry at failure to deliver much here if anything.

Even after Sunday's parliamentary vote in Athens to back savings worth 3.2 billion euros, Greece has to explain how it is going to fill a hole amounting to 325 million euros.

"A decision will be made on where this sum will come from," a finance ministry source said, with an EU source suggesting that proportionately high military spending offers the greatest promise.

Greek coalition leaders must further provide written guarantees by the scheduled 6:00 pm start (1700 GMT) of Wednesday's meeting on their determination to carry through the austerity policies, even after early elections expected in April. Conservative leader Antonis Samaras has suggested in Greek media that he could provide this, but still seek to re-negotiate after the election.

Perhaps the toughest condition of the lot still has to be worked out: this could see effective day-to-day EU management of the Greek state's revenues and expenditure, raising the prospect of a drip-feed of aid dependent on the say-so of EU officials seconded to Athens.

WRITE-DOWN

Greek Finance Minister Evangelos Venizelos has said legal papers offering the bond swap should be ready by Friday.

Athens otherwise faces a repayments crunch on March 20, with 14.4 billion euros due to bondholders.

Officials say the swap process will take about a month, and it is not clear yet what will happen if the offer is under-subscribed, even after negotiations with representatives of banks.

Hedge funds, eyeing the triggering of credit default insurance clauses in contracts, are said to have muddied the picture further.

Eurozone governments agreed that 90 percent of bondholdings would have to accept the PSI scheme for it to be considered "voluntary."

RATIFICATION

The timetable for ratification involves many stages: Wednesday's meeting is already followed by previously scheduled Eurogroup talks on Monday, and another key date is the next summit of European Union leaders on March 1-2.

But a new bailout will also require German parliamentary approval. The planned date for that is February 27, but again, this depends on all the pieces demanded in Berlin, and especially by hardliners, having fallen into place in time.

The Netherlands are also to put any request for new loans to its parliament.

Likewise Finland, which already secured cash collateral from Greece for keeping going its loans under the first bailout, and an effective opt-out from loans made under a new EU bailout fund, the European Stability Mechanism, that enters service in July.