Greece to get urgent EU aid to avoid default

BRUSSELS: Eurozone finance ministers were set Saturday 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 at 1600 GMT to sign off on releasing 12 billion euros to Greece, the fifth trance of aid from a 110-billion-euro ($160 billion) bailout granted by the European Union and IMF last year. Eurozone governments reached an agreement in principle on the payout Friday after the Greek parliament met EU and IMF demands to pass tough austerity measures despite rioting in the streets of Athens.

The ministers decided to cancel a meeting in Brussels on Sunday and speak by phone instead because nothing is holding up the next trenches, but need more time to negotiate a second bailout for Greece, diplomats said.

"Since things are moving forward on the fifth trenched, 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 eurozone 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 eurozone and IMF side," Polish Finance Minister Jacek Rostowski, whose country took over the rotating EU presidency, said on Saturday.

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 on Friday 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.

"The programme must be sealed as soon as possible, but we can't rule out that its conclusion be put off to September," a diplomat said. Another diplomat said it was better to proceed cautiously because speed is "the enemy of a thorough decision." Since the eurozone wants to avoid any scheme that would be interpreted as a default, governments are holding talks with the world's powerful credit ratings agencies to determine how they would view the deal, the diplomat said.

France, whose banks hold a sizeable proportion of Greek debt, has proposed, among other measures, that lenders roll over their loans into new 30-year bonds, giving Greece more time to put its financial house in order. German banks made a gesture Thursday by agreeing to extend the maturities of around 3.2 billion euros ($4.6 billion) in Greek bonds due to expire between now and 2014.

Copyright AFP (Agence France-Presse), 2011