Euro zone delays decision on Greek loans

Ministers say emergency loans of 12bn euros postponed until debt-ridden country introduces further austerity measures
People have camped outside the Greek parliament in protest against the government’s austerity plans [EPA]

Euro zone finance ministers have postponed a final decision on extending 12bn euros ($17bn) in emergency loans to Greece, until it introduces further austerity measures.
The ministers said on Monday, they expected to pay the next tranche of a 110bn-euro bailout package, backed by European Union and the International Monetary Fund, by mid-July.
Greece has said it needs the loans by then to avoid defaulting on its debt.
Keeping up their pressure on Athens, where public opposition to austerity has been growing, the ministers insisted that disbursement would depend on the Greek parliament first passing laws on fiscal reforms and selling off state assets.
“To move to the payment of the next tranche, we need to be sure that the Greek parliament will approve the confidence vote and support the programme, so the decision will be taken at the start of the month of July,” Didier Reynders, Belgian finance minister, said after the meeting in Luxembourg.
Papandreou’s warning

The euro zone move came a day after George Papandreou, the Greek prime minister, urged his people to support deeply unpopular austerity measures in order to avoid a “catastrophic” bankruptcy.

Addressing the Greek parliament, at the beginning of three days of debate leading up to a crucial parliamentary confidence vote on his new cabinet, he appealed for the nation to accept tax hikes, spending cuts and privatisation plans.

Papandreou said the country’s problems would not be solved by asking the IMF to leave.

He said the country needed to be united on this issue, and called on the opposition to “stop fighting in these critical times, stop sending the image that the country is being torn apart”.

“Showing that we are split is not helping us at all,” he said.

Facing public protests and dissent in his Socialist party, Papandreou reshuffled his cabinet last week and called a confidence vote for next Tuesday in an effort to push his reforms through the legislature this month.

Even then, the protests have continued outside the parliament against the proposed austerity measures. More than 10,000 people gathered on Sunday, chanting “We won’t pay! We won’t pay!”

‘Anger is deep’

Riots erupted on the streets of Athens last week against the new round of austerity measures being demanded by the EU and the IMF.

Al Jazeera’s Tim Friend, reporting from Athens on Sunday, said: “The anger is deep and [protesters] resent having to pay the price for the mistakes of others as they see it, the mistakes of banks and financiers.

“The problem for the politicians here is they’re being dictated to by the International Monetary Fund and events now taking place elsewhere in Europe with the euro zone finance ministers.

“They are the ones now calling the shots. The Greeks really are having to simply comply and do what they say.”

Antonis Samaras, the main opposition leader, has called on Papandreou to step down to pave the way for elections and renegotiation of the bailout.

“Why is the government insisting on us supporting the mistake? It does not want consensus but complicity,” Samaras said.

The cabinet hopes to push the austerity package through by the end of June, but weeks of public rallies have created political uncertainty and scared investors who fear public rage may weaken the government’s resolve.

Papandreou said the new Greek government would “correct injustices” that he said emerged with the implementation of the bailout deal, adding that he was ready to talk to the opposition regarding the issue of taxes.

He also called for a referendum to be held in the autumn on constitutional changes.

Euro zone plan

In a statement issued after a seven-hour meeting that ended in the early hours of Monday morning, the euro zone ministers announced they would put together a second bailout of Greece, which missed debt targets in the first rescue plan by big margins.

The new plan, to be outlined by early July, will include more official loans and, for the first time, a contribution by private investors.

According to this, private investors will be expected to maintain their exposure to Greece through voluntary purchases of new bonds as existing ones mature.

The statement did not say how large the new bailout would be, or give details of the private sector contribution beyond describing it as “substantial”.

Euro zone official sources have told Reuters that the new plan is expected to fund Greece into late 2014 and total about 120bn euros: up to 60bn euros of fresh official loans, 30bn euros from the private sector, and 30bn euros from Greek privatisation proceeds.

The euro fell moderately against the dollar in early Asian trade on Monday because of the delay.

The euro eased 0.3 per cent to $1.4263, edging back in the direction of a three-week low of $1.4073 hit last Thursday on trading platform EBS.

Concerns that the crisis is spreading beyond Greece’s borders were amplified by Moody’s warning on Friday that it may downgrade Italy’s credit ratings.

---