Greece set for vital 8.7b euro bailout
Source: Agencies |
July 3, 2011, Sunday
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THE eurozone was set to release a vital installment of aid money for Greece yesterday, but will leave the final decision on a second bailout for the debt-ridden country until later this summer.
The finance ministers of the 17 countries that share the euro were due to approve an 8.7-billion-euro (US$12.6 billion) tranche of Greece's existing bailout yesterday evening. An extra 3.3 billion euros will come from the International Monetary Fund, whose board is expected to approve the loan next week.
Without the 12 billion euros, Greece would default on its massive debts within days.
The parliament in Athens set the preconditions for getting the loan installment earlier this week, when it narrowly passed new austerity measures that should allow the country to hit budget targets set in return for its original 110-billion-euro rescue package last May.
But Greece needs tens of billions of euros in further assistance over the coming years, as its economy is shrinking amid the budget cuts and investors remain unwilling to lend it any more money. Eurozone leaders said last week that they will continue to support Greece, but the ministers are holding off on a new package until they know how much - and under what conditions - banks and other private creditors will contribute.
Talks with banks on a voluntary debt rollover, where they buy new bonds as their old ones mature, are likely to drag on for several more weeks, the European Union's Monetary Affairs Commissioner Olli Rehn said yesterday.
The biggest challenge for eurozone finance ministries, which are leading the discussions, will be to set terms for a rollover that do not trigger a negative opinion from rating agencies.
The European Central Bank has warned that a rating that sees Greece even in partial default on its debts could spark new unrest on financial markets and drag down other struggling eurozone countries.
Rehn is pushing for finance ministers to reach a political deal on the new rescue package at their next meeting on July 11, even if the details of the private sector involvement still have to be ironed out. However, several eurozone officials have said that a final deal may not come until later this summer or early fall.
Most economists doubt that even a second loan package will be enough to get Greece back on track. They warn that private investors will likely have to accept a cut to their holdings eventually, a move that the eurozone has so far ruled out.
The finance ministers of the 17 countries that share the euro were due to approve an 8.7-billion-euro (US$12.6 billion) tranche of Greece's existing bailout yesterday evening. An extra 3.3 billion euros will come from the International Monetary Fund, whose board is expected to approve the loan next week.
Without the 12 billion euros, Greece would default on its massive debts within days.
The parliament in Athens set the preconditions for getting the loan installment earlier this week, when it narrowly passed new austerity measures that should allow the country to hit budget targets set in return for its original 110-billion-euro rescue package last May.
But Greece needs tens of billions of euros in further assistance over the coming years, as its economy is shrinking amid the budget cuts and investors remain unwilling to lend it any more money. Eurozone leaders said last week that they will continue to support Greece, but the ministers are holding off on a new package until they know how much - and under what conditions - banks and other private creditors will contribute.
Talks with banks on a voluntary debt rollover, where they buy new bonds as their old ones mature, are likely to drag on for several more weeks, the European Union's Monetary Affairs Commissioner Olli Rehn said yesterday.
The biggest challenge for eurozone finance ministries, which are leading the discussions, will be to set terms for a rollover that do not trigger a negative opinion from rating agencies.
The European Central Bank has warned that a rating that sees Greece even in partial default on its debts could spark new unrest on financial markets and drag down other struggling eurozone countries.
Rehn is pushing for finance ministers to reach a political deal on the new rescue package at their next meeting on July 11, even if the details of the private sector involvement still have to be ironed out. However, several eurozone officials have said that a final deal may not come until later this summer or early fall.
Most economists doubt that even a second loan package will be enough to get Greece back on track. They warn that private investors will likely have to accept a cut to their holdings eventually, a move that the eurozone has so far ruled out.
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