July 13, 2024

Europe Gives $17 Billion to Greece to Avoid Default

As part of the announcement, the finance ministers said they would cancel a meeting planned for Sunday, when the conditions for a second bailout were expected to be decided, and hold a videoconference on Saturday instead.

The size of a second bailout for Greece has not yet been determined. But an official with the Austrian Finance Ministry, Thomas Wieser, was quoted by Bloomberg News on Friday as saying that Greece could receive as much as $123 billion (85 billion euros) in new financing, including a contribution from private investors.

Officials decided to postpone their meeting Sunday after concluding that there was still significant disagreement among private investors about how their contributions to a second Greek rescue should be structured, according a person who spoke on condition of anonymity because he was not authorized to speak publicly.

Several diplomats and officials briefed on the talks said that settling on a second loan package by Sunday night was too ambitious, and that holding a meeting that did not produce a detailed agreement would be interpreted as a failure by the financial markets.

Without the meeting Sunday, the next opportunity to reach a deal would be July 11, at the next meeting of euro zone finance ministers in Brussels.

The release of the immediate aid, part of an original 110 billion euro bailout ($159 billion) for Greece agreed to last year, should help the country meet its financing needs through the summer. By September, Greece will need a new rescue, which leaves only a few months for euro zone ministers to draft a package.

Olli Rehn, the Europe’s commissioner for economic and monetary affairs, said on Friday that he was confident that the payment would be released this weekend.

“I’m certain we now have a sufficient consensus that we can take a decision during the weekend, and on the fifth, transfer the Greek loan package,” he said on Bloomberg Television in Helsinki, Finland.

Part of the discussion on transferring additional aid to Greece has hinged on demands by the International Monetary Fund that the European Union fill any holes in Greece’s budget in the coming year.

The I.M.F. said last month that it would need that assurance if it were to release its portion of the immediate aid. Countries including the Netherlands have said they will provide guarantees for Greece only if there is a credible plan for substantial private investor involvement in the second bailout.

While these issues have blocked negotiations for weeks, the passage this week of new austerity measures by the Greek Parliament, and plans put forth by the banks and other holders of Greek debt to roll over their holdings, are helping to move the discussions on a second bailout forward.

Meanwhile, several telephone conversations have taken place between Mr. Rehn and John Lipsky, acting managing director of the I.M.F., who is scheduled to take part in the videoconference on Saturday. Mr. Lipsky needs to make a recommendation to his board, which meets Friday.

On Friday, European officials expressed confidence that a compromise could be found that would allow the immediate aid to be released.

“We think we can come up with something which is enough to convince the I.M.F. over the 12 billion euros,” said one official, who had been briefed on the talks, “but on the other hand a comprehensive package involving the private sector is such a tricky deal that Sunday — and possibly the 11th — is far too optimistic.” The official spoke on condition of anonymity because he was not authorized to discuss the negotiations publicly.

The link between the two issues suggests that the broad outlines of a second bailout for Greece will probably be put forth by European officials as they try to persuade members to back any deal reached with the I.M.F.

Europe’s finance ministers have not confirmed the 85 billion euro figure for the second bailout. Calculating an amount is complicated because of the different elements that would be used in a new rescue effort.

The cancellation of Sunday’s meeting might also increase criticism of the head of the Eurogroup of finance ministers, Jean-Claude Juncker of Luxembourg. He called the gathering Sunday after finance ministers failed to reach a deal at the last euro zone meeting in Luxembourg.

Meanwhile, the Institute of International Finance, a lobbying group of international financial institutions, said there was broad support for the idea of participating in further aid for Greece. “The private financial community is ready to engage in a voluntary, cooperative, transparent and broad-based effort to support Greece,” it said Friday.

The options include rolling over or extending bonds that mature into long-dated instruments. It was also important to consider debt buyback proposals to reduce long-term debt, the institute said. Under a French plan announced in the past week, the private sector would reinvest at least 70 percent of the proceeds of bonds maturing before the end of 2014 into new 30-year Greek debt.

German banks indicated Thursday that they would be willing to adopt a similar plan.

Article source: http://feeds.nytimes.com/click.phdo?i=b4c372ee1876b7811b7a6e063a18ce93

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