Europe's finance chiefs plan drip-feed loan to save Greece
EUROPEAN finance ministers will consider a plan to drip-feed bailout loans to Greece at a slower pace, until a deal on new bailout terms is finalised in July.
The news took some of the tension out of talks last night between euro-area finance ministers, the IMF and the ECB, previously under pressure to deliver agreement out of fear any dithering risks would scare markets further.
Last night Belgian Finance Minister Didier Reynders said European institutions and the IMF could release €6bn of loans to Greece in July, instead of the €12bn due as the fifth instalment of the current Greek bailout, signed up to in 2010.
He made the comments after Luxembourg's Prime Minister Jean- Claude Juncker said there would be no agreement at a meeting of euro ministers on a new three-year package for Greece.
The Belgian idea to pay over the money in instalments would allow Greece to repay national debts as they fall due and avoid a messy default.
Holding some money back would give European leaders and the IMF extra leverage to pressure politicians inside Greece to agree -- and stick to -- an austerity programme.
The newly appointed Greek finance minister, Evangelos Venizelos, was the latest minister to face a baptism of fire at his first European Summit.
He arrived in Luxembourg two days after being appointed to office to find his country dominating the euro-area agenda. Mr Venizelos said he had come with a "strong commitment" to budget cuts of €78bn, despite riots and political instability at home.
Many of his fellow ministers have yet to be convinced Greece can deliver on commitments made under its new bailout agreement. This week the Greek prime minister will fight a motion of confidence in the parliament in Athens. He hopes victory there will restore his credibility as a negotiating partner.
On Friday Germany climbed down from a demand private sector lenders to Greece would have to shoulder a large share of the new bailout.
Germany relented to pressure from the European Central Bank (ECB) and from the French government, which were both opposed to a measure that would inevitably push Greece into defaulting on its loans.
Instead ministers from across Europe are seeking a compromise agreement which involves the private sector but can be shown to be voluntary.
Ireland is opposed to any mechanism that risks triggering a sovereign default in Europe; while we are at risk of being dragged behind.
But even after Germany bowed to pressure other north European countries are still keen to at least be seen to insist on a tougher regime for the second Greek bailout.
Ministers and officials were last night slowly teasing out the implications of that. (Additional reporting Bloomberg)