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Commissioner urges easing in Greek repayment schedule

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Commissioner urges easing in Greek repayment schedule

Olli Rehn - Photo EC

(ATHENS) - The European Union is planning a "systemic" response to the eurozone debt crisis, a senior EU official said Thursday, two days after the IMF head called on the EU to adopt a "comprehensive" approach.

EU Economics Affairs Commissioner Olli Rehn also backed a delay for Greece in the repayment of its 110-billion-euro rescue loan, accorded in May by both the EU and the International Monetary Fund.

Rehn said EU finance ministers were ready to look favourably on a delay in the face of concern about Greece's ability to meet a 2015 deadline given the parlous state of its economy.

Rehn in addition disclosed that the EU was preparing a longer-term approach to assisting eurozone countries in financial jeopardy.

"We are currently preparing a complete systemic response to the systemic crisis of the EU," he told reporters.

"A systemic crisis calls for a systemic response," he later said in an address to the Greek parliament.

"Fundamental changes will be ahead of us," he said, adding: "I strongly disagree with the claim that the current economic situation inevitably puts the European venture in question."

European leaders are to accelerate work on a permanent crisis fund for the eurozone at a summit next week, with non-euro EU states "associated" with the plans, according to draft conclusions seen by AFP.

An agreement thrashed out for European Union leaders to endorse at the Brussels summit next Thursday and Friday would see changes to the bloc's Lisbon Treaty, required for the facility's use, completed "by the end of 2012" rather than mid-2013 as initially planned.

The EU in May created a 750-billion-euro joint EU-IMF rescue fund, a mixture of cash loans and guarantees provided by eurozone and EU partners for troubled states. That came a week after finalising a 110-billion-euro (145.5-billion-dollar) bailout for Greece.

As it became clear that other euro currency countries would likely need financial assistance as well -- starting with Ireland -- leaders decided to turn the three-year 440-billion-euro European Financial Stability Facility into a permanent mechanism.

The facility represents the EU's contribution to the joint fund with the IMF.

The EU earlier this week came under subtle pressure from IMF Managing Director Dominique Strauss-Kahn, who said here Tuesday the eurozone debt debacle demanded "something more dynamic ... a comprehensive solution ... not piecemeal, one country at a time."

Rehn said a Greek debt repayment extension was scheduled to be put before eurozone states for approval early next year, adding that it would run for 7.5 years "on average."

A senior Greek finance ministry official had earlier this week said an extension to 2024 was under consideration.

"With this prolongation we would bring the Greek loan package fully in line with the Irish programme so as to ensure equal treatment of member states," Rehn said.

And he added that no new cutbacks would be demanded for the delay.

"There will be no new conditions."

"It may require an amendment to the loan agreement but that is a technical thing and it will not call for new political conditions."

Analysts on financial markets have expressed concern that Greece would run into great difficulty in meeting its rescue loan repayment obligations.

That concern was a factor in a recent upsurge of tension on eurozone bond markets, driven also by sentiment that some eurozone countries may eventually have to restructure debt, a suggestion strongly rejected by EU officials.

The EU contributed two-thirds and the IMF a third of the 110-billion-euro package agreed in May to save Greece from default as its massive debt and public deficit problems brought its finances to the brink of collapse.

Rehn was making a one-day visit to Athens to discuss with Greek officials the implementation of their economic recovery plan.

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