Euro-zone finance ministers were set to release urgent aid to save Greece from imminent bankruptcy amid tough behind-the-scenes wrangling on a second bailout for the debt-stricken country. The ministers were to hold a conference call to sign off the release of 12 billion euros to Greece, the fifth tranche of aid from a 110-billion-euro ($160 billion) bailout granted by the European Union and IMF last year.
Euro-zone governments reached an agreement in principle on the payout after the Greek parliament met EU and IMF demands to pass tough austerity measures despite riots in the streets of Athens. The ministers decided to cancel a meeting in Brussels and talk via phone instead as nothing is holding up the next tranche, but more time is needed to negotiate a second bailout for Greece, diplomats said.
“Since things are moving forward on the fifth tranche, which is good news and a breath of fresh air, and that work on (the new bailout) is not ready for Sunday, we preferred to have a conference call,” a European diplomat said. Greece desperately needs the 12 billion euros this month to avoid an immediate default on its debt that analysts warn could spill over to other Euro-zone nations such as Ireland and Portugal, and even Spain and Italy.
But Athens has requested a new rescue package that Prime Minister George Papandreou says could be as big as the first one. “We can’t afford to relax and we need to move forward as fast as possible, both on the euro-zone and IMF side,” Polish Finance Minister Jacek Rostowski, whose country took over the rotating EU presidency, said.
Negotiations are trickier this time around because some governments, especially Germany, want private investors to share the pain by agreeing to a voluntary rollover of Greek debt. Under the scheme they would buy new bonds to replace those maturing soon. Their plan won the backing of a key global finance group, the Institute of International Finance (IIF), which represents banks, insurers and investment funds.
“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,” the Washington-based IIF said. Diplomats said a decision on the size of the new bailout, and the participation of private investors could come at another meeting in Brussels on July 11, or up to two months later.
