August 7, 2022

Europe Agrees to Give Billions to Greece

BRUSSELS — European finance ministers staved off an imminent Greek default Saturday, agreeing to release a vital installment of financial aid to Athens, while delaying a deal on a second large rescue for Greece, possibly until September.

After a two-hour conference call, the 17 euro zone ministers said they would sign off on an 8.7 billion euro ($12.6 billion) loan that had been expected as part of a 110 billion euro package agreed upon last year. The board of the International Monetary Fund is expected to approve its current contribution, 3.3 billion euros, in the coming days.

Without the loans, the Greek government faced the prospect of insolvency within weeks. The euro zone ministers’ decision followed two votes in Greece’s parliament to approve a tough austerity package, a condition for international assistance.

But, with Greece struggling to restore its finances, European finance ministers also need to put together a second package of loans to help it through 2014. This is expected to amount to 80 billion to 90 billion euros. Though that was discussed Saturday night, the ministers gave few details in a statement, and one official briefed on the talks but not authorized to speak publicly said that completing the new bailout would “not be easy.”

“They are going to have to work really hard, and we don’t expect an agreement before the next meeting of the euro zone ministers on July 11, and possibly not before September,” the official added.

Saturday night’s decision ends weeks of tense diplomacy between the euro zone nations and the I.M.F., which said it required assurances that the Europeans would backstop Greece’s finances for the next 12 months before it could release any more aid. Some countries, including the Netherlands, were reluctant to give such a guarantee without knowing that private sector investors would also play a substantial role in the new bailout.

But, when it became clear that a second bailout would take much longer to put together, the dispute ended with an opaque declaration from the ministers and with no details about the potential scope of the new rescue.

“The precise modalities and scale of private sector involvement and additional funding from official sources will be determined in the coming weeks,” the euro zone ministers said in a statement.

That seemed to satisfy the I.M.F.

“This commitment — together with the recent parliamentary passage of the necessary fiscal measures in Greece — will enable the I.M.F.’s executive board to consider the completion of the fourth review and the release of the next tranche,” Caroline Atkinson, the I.M.F.’s chief spokeswoman, said in a statement.

Greece’s finance minister, Evangelos Venizelos, described the ministers’ action as “a development that boosts our country’s credibility on a global level.”

“What is now critically important is the timely and effective implementation of parliamentary decisions so that we can gradually emerge from the crisis for the benefit of the national economy and the Greek people,” the minister said in a written statement on Saturday. He was referring to two votes in Greece’s parliament earlier in the week that approved a new raft of deeply unpopular austerity measures.

Talks with European banks on a voluntary debt rollover have proved complex enough that they may drag on well into the summer. One consideration is the need to create the package so that rating agencies do not classify it as a default — a blow to confidence that would undermine efforts to prevent contagion.

According to Germany’s finance minister, Wolfgang Schäuble, German banks are willing to roll over around 3.2 billion euros of Greek bonds maturing to 2014. France has a plan to involve its banks though the total amount has not been disclosed.

Though Olli Rehn, the European commissioner for economic and monetary affairs, had set a July 11 deadline for a deal on the second package, Greece’s next financing deadline does not arrive until September.

Speaking in Warsaw, Jacek Rostowski, the finance minister of Poland, emphasized the need to spur economic growth in Greece, in addition to cutting government spending.

Niki Kitsantonis contributed reporting from Athens.

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