Euro crisis: “We are not fully in control of the sequence of events…”

Having watched as yesterday’s ‘deadline’ went whooshing past their heads, Greek party leaders are due to meet later tonight to consider another draft bail-out deal – once it’s been translated into Greek…  You can follow events as they unfold at the Guardian’s live-blog.

Meanwhile, as promised, Frau Bundeskanzlerin has joined Nicolas Sarkozy on the campaign trail in a joint television interview, following a joint French/German cabinet meeting – as the BBC reports

Earlier the two leaders held a joint cabinet meeting, at the Elysee Palace, focused on the debt crisis as well as plans to co-ordinate the two countries’ corporate tax policies.

Nine French ministers and eight German ministers were involved.

[A meeting of the European Government? – Ed]  You might well think that…

And whilst the Greek EU Commissioner Maria Damanaki is openly speculating about “the prospect of Greece being forced out of the single currency if it did not quickly assert control over its finances”, the European Commission Vice President Neelie Kroes has told a Dutch newspaper that there would be “absolutely no man overboard” if Greece left the euro.

“What’s a man overboard?” Mrs Kroes told the Dutch newspaper Volkskrant. “It’s always said that if you let one country get out, or ask it to get out, then the whole structure collapses. But that’s simply not true.

“The Greeks have to realise that we Dutch and we Germans can only sell emergency Greek aid to our taxpayers if there’s evidence of good will.”

A similar message was delivered with a more optimistic spin by Jean-Claude Juncker, chairman of the “eurogroup” of eurozone finance ministers, who said he had no doubt that Greece would remain within the eurozone, provided that it met its obligations to other members.

“The euro will outlive us all,” he said.

But then, he would say that, wouldn’t he?

And it is serious, as Arthur Beesley explains in the Irish Times

Patience ran out long ago – and many critical issues in the bailout remain to be settled. “We are not fully in control of the sequence of events,” says a well-placed euro zone official. No understatement there.

In question is whether Greek leaders agree to enact binding legislation to execute the bailout programme come what may after the election. Only that will satisfy euro zone finance ministers, who have the power to grant a new €130 billion bailout or not. [added emphasis]

This, in turn, is the essential condition for a complex debt restructuring deal in which Greece’s private creditors are supposed to cut the value of bonds worth €200 billion in half. The bondholders are waiting in the wings to see that the second bailout goes ahead, but the restructuring arrangement will be entirely “voluntary”, meaning it will be open to them not to participate.

The concern is that some will choose instead to trigger credit default swap insurance contracts on their debt holdings, something with potential to further disrupt volatile markets. EU leaders are betting, however, that most of Greece’s investors will decide that their greater interest is served by taking part in the initiative as they are certain to lose more than half their receivables in a default scenario.

So far, so difficult, but that’s not the end of it. Lurking in the backdrop is anxiety that the figures on which the bailout is predicated do not stack up. The basic aim is to reduce Greek debt from some 160 per cent of national output to 120 per cent by 2020, still twice the EU limit but a level which may give the country at least a chance of survival within the euro zone.

By all accounts, the target will be missed. This, in turn, has led to discussion as to whether the European Central Bank might forego its profit on €55 billion in Greek bonds it acquired at knock- down prices in the past two years.

The bank is reluctant, but has not ruled out such a move. No change is likely for as long as Greek leaders hold out.

Read the whole thing.

Update  The Greek party leaders’ meeting has been postponed until tomorrow morning.