Greek parliament agrees package on budget cuts
Vote paves way for EU ministers to rubber-stamp €12bn payment and second bailout worth €120bn
Published 01/07/2011 | 05:00
Eurozone finance ministers will finally be able to sign off on the next aid payment for Greece after lawmakers approved a budget-cutting package yesterday.
It was the second Greek vote in two days in favour of the conditions attached to the EU/IMF bailout package and means a €12bn loan payment can be made in July.
That means Greece is no longer in imminent danger of default because the funds are earmarked to pay off debt falling due next month. It also clears the way for a second Greek bailout worth around €120bn.
European banks, meanwhile, were being lined up to accept plans to roll-over their share of Greek government debt.
Greek parliamentary approval for the bailout conditions and a commitment from banks to roll over debts were the two issues potentially blocking a new bailout.
Eurozone finance ministers will meet in Brussels on Sunday to sign off on the new package and, they hope, close this chapter of the debt crisis.
"This is a first good answer from Greece, now they need to implement" the deficit cuts, Belgian Finance Minister Didier Reynders said yesterday.
"I expect we will be able to organise the payment of the next tranche of €12bn," he said.
Eurozone leaders want to tidy away the Greek crisis quickly, even if few believe the new package will ultimately extract Greece from its debt burden.
Political leaders hoped the deal will give Greece time to get its finances in order, but just as importantly they think that by ending medium-term fears of a Greek default they can prevent the crisis infecting the entire euro region, or even the global economy.
As the Greek puzzle continued to be pieced together yesterday the euro hit a three-week high, and the Euro Stoxx 50 Index of leading European shares rallied for a fourth day.
Greece is Europe's most-indebted country with debt at about 150pc of economic output. Ratings agency Standard & Poor's gives it the lowest credit rating of any country.
The finance ministers' meeting this weekend is being called to release the fifth tranche of aid from last year's €110bn bailout.
Once that happens the focus will shift to the second bailout package.
It needs around €45bn in new loans from the IMF and EU institutions in addition to €30bn to be raised by Greece itself from privatisations and €30bn raised by convincing banks to roll over debt for up to 30 years.
The second bailout package won't be finalised until a progress report on Greece is signed off by the "troika" of the IMF, European Commission and European Central Bank.