RPT-PREVIEW-Breakthroughs on Greece, reform unlikely in Madrid

(Repeats late Wednesday story without changes)

* Meeting to “take stock” of situation

* No fresh moves likely on Greek aid mechanism

* Apart from Greece, will not discuss individual countries

* Presentation on euro zone reform to be brief

By Jan Strupczewski

BRUSSELS, April 14 (BestGrowthStock) – Euro zone finance ministers
look unlikely to break new ground on the Greek crisis or
long-term reform of the zone at talks in Madrid this week.

Finance ministers from the 16 countries using the euro will
meet on Friday and Saturday in Madrid, joined for part of the
time by finance ministers and central bank governors from the
rest of the European Union.

After last Sunday’s announcement by euro zone governments of
a 30 billion euro financial safety net for Greece, the Madrid
meeting will largely “take stock” of the situation rather than
seek fresh solutions, said one source close to preparations for
the meeting.

“Given what we discussed last Sunday, the degree of urgency
on Greece has diminished. It will be more stock-taking rather
than having to decide anything new or substantive. It should be
quieter than previous discussions on Greece,” the source said.

After an initial, positive reaction to the announcement of
the safety net, markets have begun to worry about legal issues
surrounding it and ambiguity over the precise way the mechanism
would be activated, if Greece asks for aid.

Greek bond yields rose back on Wednesday after a newspaper
reported that an economist in Germany, where public opinion is
strongly against helping Greece, would file a suit against the
aid scheme in Germany’s Constitutional Court. [ID:nLDE63D0QX]

However, EU sources suggested such issues were unlikely to
be discussed in Madrid.

UPDATE ON GREECE

Greece may give the ministers an update on its situation
after it successfully tapped markets at a Treasury bill aution
on Tuesday, a second source with insight into the preparations
said.

Asked what additional conditions Greece would have to meet
to receive emergency aid if it made such a request, the source
said any requirements might be for more structural or
administrative reforms, and reforms to its methods of gathering
statistics or providing information.

“But definitely nobody will ask Greece to do more than the 4
percent of GDP correction of their deficit this year. You can
safely exclude that,” the source said.

Greece has promised to cut its government budget deficit to
8.7 percent of gross domestic product in 2010 from an estimated
12.7 percent in 2009.

The ministers will also discuss long-term budget deficit-
cutting programmes in other euro zone countries that have
already been assessed by the European Commission.

“There are no major points of disagreement; the discussion
will be more horizontal — what needs to be done now in terms of
budget consolidation, a few more general messages,” the source
said. “We will not discuss individual countries.”

LONG-TERM REFORM

Financial markets are also eager for signs of how the euro
zone may strengthen coordination of economic policies among
countries, and reduce wide divergencies in the performance of
economies that contributed to the Greek crisis.

European Economic and Monetary Affairs Commissioner Olli
Rehn will present to the ministers in Madrid his initial ideas
on how to overhaul the EU’s economic governance.

However, the discussion will be very preliminary because the
European Commission only intends to present its reform proposals
on May 12, sources said.

Rehn presented some of his ideas at a news conference on
Wednesday, including having the commission place more emphasis
on reducing debt in euro zone countries, and possibly suspending
the flow of EU aid in the form of structural funds to countris
which break fiscal rules. [ID:nLDE63D2AA]

Rehn said the Commission would be issuing more early
warnings to countries with budget policies that were heading in
the wrong direction — an option used very rarely until now.

“It will not go further than a short presentation and an
exchange of views,” the first source said of Rehn’s presentation
in Madrid.

“There is general backing for it, the timing is right. If
not now, then when?”
(Editing by Andrew Torchia)

RPT-PREVIEW-Breakthroughs on Greece, reform unlikely in Madrid