BRUSSELS ? As Greece scrambles to implement painful new budget cuts and reforms, the other member countries of the eurozone are trying to ensure Greece will be able to manage its debts after it receives a second massive bailout.
When the currency union's leaders agreed to support Greece with an extra euro130 billion ($170 billion) in rescue loans in October, they set one key target: the country's debt load, currently at more than 160 percent of economic output, would have to fall to around 120 percent by 2020 ? the maximum level the eurozone and the International Monetary Fund see as sustainable.
But since October, Greece's dire economic situation has deteriorated even further. Fresh figures showed Tuesday that the country's economy shrank 7 percent in the fourth quarter compared with a year earlier ? the steepest drop after four years of recession.
Late last month, Greece's international debt inspectors estimated that even if it gets the euro130 billion bailout and private investors agree to forgive some euro100 billion of its debt, the country would still be some euro15 billion short of the 2020 target. Officials have since declined to give an updated estimate.
The most obvious way to reach the 120 percent goal would be for the European Central Bank, which analysts estimate holds up to euro55 billion face value in Greek bonds, to contribute any profits it makes on the bonds. The bank is believed to have bought them at knocked-down market prices for about euro40 billion and would pocket the difference by holding the bonds to maturity over several years.
The bank has rejected suggestions it join in debt reduction being negotiated with private bondholders. But it has held out the possibility of simply paying the profits to its member governments, which could then do what they wanted with the money.
Top ECB official Benoit Coeure was quoted in an interview in the French newspaper Liberation published as saying that "if there is a profit, as with all monetary revenue, it will be distributed to governments."
"They could use it to contribute to the sustainability of Greek debt," Coeure was quoted as saying. His comments echoed remarks by ECB President Mario Draghi last week.
Other hurdles remain. A European official says a push by some euro nations for a reduction in a euro30 billion ($40 billion) "sweetener" Greece has been negotiating with private creditors is likely to fail.
Greece has been in debt-reduction discussions that could see private creditors take losses of around 70 percent on their Greek bonds.
As an encouragement to take the offer, investors have been promised 15 percent of their bonds' face value immediately. European officials have said their goal is a voluntary agreement that would cause less disruption on the bond markets that countries use to raise money.
A European official said Tuesday that France, the Netherlands and Finland have suggested a reduction to help close a financing gap in Greece's bailout.
However, the official said the proposal "will not fly," adding that changes to the debt deal "could risk the whole operation."
He was speaking on condition of anonymity because the talks are confidential.
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McHugh reported from Frankfurt, Germany. Greg Keller in Paris contributed to this story.
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