Enda Kenny, Prime Minister of Ireland, informed the Parliament that a people’s referendum is required to approve the European stability treaty. Meanwhile, a German court overruled the government’s efforts to set up secret and special fast-track parliamentary panel meetings to decide on further bailouts.

The German parliament approved the second loan package for Athens after Chancellor Merkel convinced lawmakers to support Greece. Though the motion was approved by 496 votes to 90, the move remains unpopular among leaders and the public. The Chancellor might face difficulties in garnering support to increase the firepower of the ESM as demanded by the IMF and G20.

G20 nations announced their contribution to the International Monetary Fund (IMF)—for combating Eurozone’s debt crisis— is conditional upon the strengthening of the European Stability Mechanism (ESM), Europe’s emergency rescue fund. Thereby the group is exerting pressure on Germany, which is vehemently against its expansion. G20 nations would bolster the IMF’s war chest with US$500–600bn, adding to the current US$385bn. When combined with the ESM, new resources worth US$2tr would be available to contain the financial contagion from the Eurozone debt crisis. Earlier, the IMF had proposed a merger of the temporary European Financial Stability Fund (ESFS) with the ESM to increase the latter’s capacity to €750bn (US$1tr).

The EC forecast that economic activity in the 17-member Eurozone would contract 0.3% in 2012 (as against the 0.5% growth estimated earlier), while the wider 27-state EU would stagnate. It also warned that the Eurozone is nowhere near out of the debt trap.

The International Monetary Fund (IMF) has demanded that the European Stability Mechanism (ESM) should be expanded before it contributes €13bn to Greece’s €130bn rescue package. IMF’s Managing Director Christine Lagarde wants that funds remaining in the current European Financial Stability Facility (EFSF) be clubbed with the planned €500bn ESM, taking the latter’s strength to €650bn-750bn. While Finland and the Netherlands side with the IMF, Germany is convinced the increase is ‘not necessary’.

Most private holders of Greek debt would accept a 74% haircut to their bond holdings, according to sources close to a deal between the government and private sector bondholders on Tuesday. Meanwhile, Prime Minister Lucas Papademos said that the deal with private lenders, which includes a swapping of current debt for longer-term debt, needs to be finalised by 10th March at the latest.

Eurozone finance ministers approved the €130bn bailout package for Greece. Though the second package would help Greece avoid immediate bankruptcy, only a miniscule sum will be channelled towards strengthening its economy—the bulk will be used to stabilise the country’s banking system and finance the bond swap deal with private creditors. The ministers also formulated measures to cut Greece’s debt to about 121% of its GDP by 2020, as against the initial aim to lower it to 120%. Meanwhile, a confidential report by the IMF, European Central Bank and European Commission revealed that if Athens delays implementing reforms to increase competitiveness, debt could surge to 160% of GDP by 2020. Separately, private lenders could take a deeper write-down on Greek bonds, up to 53.5% (compared to 50% agreed earlier), and the ECB will forego profits on its holding of Greek bonds in favour of national central banks; this would provide indirect debt relief to Greece.

Eurozone finance ministers will be taking the final decision on a second bailout for Greece today. The bailout package, worth around €130bn, is widely expected to be approved. Although the bailout is not expected solve Greece’s economic problems, it would help it avoid a default on the €14.5bn bond repayment due in March.

Greece’s rescue package could be approved by the Eurogroup (group of Eurozone finance ministers) on Monday, exactly a month before its €14.5bn bond repayment falls due. Athens finally accepted the EU’s latest demand of identifying another €325m in savings, but only after the EU dropped the idea of part payment of the bailout. Earlier, growing doubts about Greece’s commitment to implement stringent reforms had led some members to suggest that only a part of the money be given to Greece to help it avoid a default in March, and the balance delivered after the elections in April.

Greek ministers are hoping the bailout deal would be finalised during the meeting of Eurozone Finance Ministers on Monday. According to some reports, Eurozone officials are looking to delay the bailout till after elections in Greece, while still helping Athens avoid an unruly default in March.

Eurozone finance ministers have cancelled their meeting scheduled for today, replacing it with a telephone conference. This indicates diminishing chances of an approval for Greece’s €130bn bailout. Jean-Claude Juncker, Chairman of the Eurogroup (as the group of finance ministers is known), said he is yet to receive a signed commitment from Greece’s political leaders stating that they would implement the extremely unpopular reforms, including wages, job and pension cuts, which were approved by the Parliament on Monday. Athens also failed to plug the €325m gap in the targeted €3.3bn savings for 2012. The next face-to-face meeting of the Eurogroup would be held on 20th February. The rescue package is imperative to help Athens avoid a disorderly default on the €14.5bn bonds that are due on 20th March.

The EU set a Wednesday deadline for the two main parties in the Prime Minister Lucas Papademos’ government to sign a written undertaking to enforce the wage, job and pension cuts that were approved yesterday. Eurogroup finance ministers have also demanded that Greece identify another €325m in cost saving avenues, which will fulfil the targeted €3.3bn spending cut for 2012, before they sign the €130bn bailout.

The Greek parliament passed the austerity bill today, which includes unpopular reforms such as a 22% cut in minimum wages along with pension and job cuts, amid widespread public protests. The bill, a pre-requisite to unlock the €130bn bailout, was passed with 199 of 300 members voting in favour. The approval reassures Greece’s lenders, the ‘troika’ of European Commission, European Central Bank and the International Monetary Fund, about Greece’s political will to implement the reforms, and will help Greece draw the bailout fund, thus avoiding bankruptcy.

Political leaders in Greece finally agreed on the terms that will enable Greece to draw the €130bn bailout funds. However, finance ministers of the Eurozone put additional terms including ratification by the Greek parliament, identifying another €325bn in spending cuts and a greater commitment of political leaders in Greece to implement the reforms. Meanwhile, European Central Bank (ECB) president Mario Draghi hinted at providing support to Greece without overstepping the law, which bans the bank from financing governments.

Jean-Claude Juncker, Chairman of the Eurogroup (a term for the group of Eurozone finance ministers), has convened a meeting of finance ministers of the 17-member monetary union in Brussels for Thursday evening, to discuss Greece’s bailout package, an indication that the deal is progressing. International Monetary Fund (IMF)’s Managing Director Christine Lagarde will also be present. Meanwhile, Greece’s Prime Minister Lucas Papademos said that political leaders had agreed on all-but-one point set out by the ‘troika’, which comprises the European Commission, European Central Bank and IMF. Greek leaders have been reluctant to accept the tough and unpopular terms needed to achieve the €130bn bailout package, as they could face parliamentary elections as early as April.

Turning a deaf ear to the EU’s warnings that the bailout deal must be finalised by mid-February, Greece’s political leaders stretched the talks for another day, citing missing paperwork. Political leaders in Greece have been reluctant to accept the tough reforms set forth by the troika (European Commission, European Central Bank and the International Monetary Fund) that will bring Greece the much-needed €130bn in bailout funds. Meanwhile, Dutch Prime Minister Mark Rutte and German Chancellor Angela Merkel differed on Greece’s exit from the EU—the former asuggested the EU ‘can live without Greece’, while Merkel said she would try not to compel Greece to move out of the monetary union.

China’s growth in 2012 could plunge to half the current projection of 8.2% if the Eurozone debt crisis deepens, according to the International Monetary Fund (IMF). A sharp recession in Europe would force the Chinese government to launch a ‘significant’ fiscal stimulus to shield the economy from an abrupt halt, the IMF added.