Euro zone finance ministers will approve the next tranche of emergency aid for Greece on Saturday and take decisions on a second three-year financing plan for Athens on July 11, euro zone officials said.
The release of the 12 billion euro ($17 billion) tranche from the euro zone and the International Monetary Fund has been made possible after Greece passed new austerity and reform laws on Wednesday and Thursday, removing the threat of a near-term default.
“The conditions are now in place for a decision on the disbursement of the next tranche of financial assistance for Greece and for rapid progress on a second assistance package,” European Commission President Jose Manuel Barroso and European Council President Herman van Rompuy said on Thursday.
The second financing programme for Greece is to be from 2011 to 2014 and will come on top of the exiting 110 billion euro programme agreed with euro zone countries and the International Monetary Fund last year.
The ministers are unlikely to give much new detail on the second financing programme after the Saturday call, which will be focused on releasing the next tranche of aid for Greece, euro zone official sources said.
“Any reference to the successor programme (the second bailout for Greece) will be in line with what has been said over the last days,” one euro zone official source said.
European Union leaders made a clear commitment to the second programme at their last summit on June 23-24, which should satisfy the IMF’s condition that the euro zone must commit to finance Greece 12 months ahead for the IMF to contribute.
The leaders said in a statement the Greek votes would “provide the basis for setting up the main parameters of a new programme jointly supported by its euro area partners and the IMF, in line with current practices.”
They also said funding for the programme would be from euro zone taxpayers but also from a substantial, but voluntary contribution of private investors via a Greek debt rollover.
The additional external financing for Greece in that period, from both private and public money, could be about 80-90 billion euros, officials have said. Greece is expected to raise another 30 billion euros from privatisation in that time.
HOW MUCH FROM THE PRIVATE SECTOR
Finance ministers from the 17 countries using the euro and the President of the European Central Bank Jean-Claude Trichet are likely to discuss in a conference call on Saturday how much of the 80-90 billion euros could come from the private sector.
Private financial institutions held talks with finance ministry and central bank officials in various euro zone countries last week to discuss under what conditions the private sector would be willing to help finance Greece and for how much.
The involvement of the private sector in the next package for Greece is a must for several euro zone countries to provide more money for Greece as voters grow increasingly opposed to shouldering the burden of bailing out Greece on their own.
But the private sector involvement has to be voluntary so as not to trigger a downgrade of Greek debt to default status by rating agencies — a development which could put the whole Greek banking sector at risk.
The Institute of International Finance, a global association of financial institutions, issued a statement on Friday to say the “private financial community is ready to engage in a voluntary, cooperative, transparent and broad-based effort to support Greece given its unique and exceptional circumstances.”
German Finance Minister Wolfgang Schaeuble has said German banks wanted to roll over 3.2 billion euros worth of Greek bonds maturing to 2014.
French banks have reached an agreement on how to roll over part of their Greek debt holdings, French President Nicolas Sarkozy said, but did not indicate the total amount.
FOCUS ON NEXT TRANCHE
The release of more money for Greece from the existing programme will be the main tangible result of the conference call of ministers, which is to start at 1600 GMT on Saturday, and which could produce a statement, officials said.
“The ministers will really focus the meeting on the 5th tranche. The fact that they are not meeting in person means that there are no major obstacle to decide on this,” one euro zone official, who asked not to be named, said.
“They may exchange information on the state of play on the informal contacts that have been taking place with the private sector which is one of the many issues in the second programme and how they will organise the discussions on July 11.”
The meeting on July 11 is to help finalise the second financing package for Greece, but some officials said they would not be surprised if the final decision on the second package was only taken by finance ministers in September.
At the call the ministers are also likely to discuss Finland’s condition for contributing to the new aid under which Greece will have to provide collateral for the part of the loans guaranteed by Finland through the European Financial Stability Facility (EFSF).
“We have a political solution and we will find a technical solution in due course,” a second euro zone source, involved in the talks on Greece said.
