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Greece: Eurozone ministers delay decision on vital loan Greece: Eurozone ministers delay decision on vital loan
(about 1 hour later)
  
Eurozone finance ministers have postponed their decision on a 12bn euro ($17bn; £10bn) loan to Greece until it introduces further austerity measures. Eurozone finance ministers have postponed their decision on a 12bn-euro ($17bn; £10bn) loan to Greece until it introduces further austerity measures.
The ministers said they expected to pay the latest tranche of a 110bn euro EU and IMF aid package by mid-July. The ministers said they expected to pay the latest tranche of a much larger aid package by mid-July.
But its release depends on the Greek government surviving a vote of confidence on Tuesday.But its release depends on the Greek government surviving a vote of confidence on Tuesday.
Parliament then must also pass 28bn euros worth of new spending cuts and economic reforms.Parliament then must also pass 28bn euros worth of new spending cuts and economic reforms.
This latest tranche - of a 110bn-euro European Union and International Monetary Fund aid package - is crucial as Greece needs the aid by July to pay off the creditors of its huge debts.
But there are also practical questions about whether the country can implement the reforms being demanded in return.
Greeks have already seen wages and pensions cut and there have been regular, mass demonstrations - even riots - in protest.Greeks have already seen wages and pensions cut and there have been regular, mass demonstrations - even riots - in protest.
The latest public opposition to the cutbacks involves Greek workers at the state-owned electricity company, who are on the first day of a 48-hour strike.
At a press conference on Monday, Jean-Claude Juncker, Luxembourg's prime minister who chairs the meetings of the 17 eurozone finance ministers, said he felt for the Greeks: "This is something that affects me greatly. You look at the reaction of the people on the streets. You see they are rebelling. I understand that and I'm touched by that."
But he also said that there was no option but to keep to the existing plan: "There is no other choice than fiscal consolidation in Greece and in other fiscally weakened countries." The latest public opposition to the cutbacks involves Greek workers at the state-owned electricity company, who are on the first day of a 48-hour strike.
Eurozone finance ministers have also committed themselves to putting together a second bail-out package to keep the country afloat. The set of loans could be bigger than the first bail-out. Privatisation fears
Second rescue
Mr Juncker said that as long as the Greek parliament supported the new measures, he was certain Greece would get a second bail-out.
The Greek prime minister last week reshuffled his cabinet, including appointing a new finance minister: Evangelos Venizelos.
"There is an immediate and urgent need to regain the credibility of the country, as far as the implementation of the [rescue] programme," Mr Venizelos said.
Stock markets and the euro fell at the start of business on Monday, pressured by the lack of resolution to the Greek crisis.
Leading indexes in Frankfurt, Paris and London were all down around 1% and the euro lost 0.5% against the US dollar in early trading, but stock markets and the euro later recovered to show only minor falls.
Appeal for unity
After a seven-hour meeting in Luxembourg that ended early on Monday, the finance ministers said they would not approve the disbursement to Greece of the 12bn euros (8.7bn euros from eurozone governments and 3.3bn euros from the IMF) until the country's parliament passed the fiscal strategy and privatisation laws.After a seven-hour meeting in Luxembourg that ended early on Monday, the finance ministers said they would not approve the disbursement to Greece of the 12bn euros (8.7bn euros from eurozone governments and 3.3bn euros from the IMF) until the country's parliament passed the fiscal strategy and privatisation laws.
Athens has said it needs the 12bn euros from the existing package by July to avoid defaulting on its debt. Asked how Greece could privatise a large state-controlled company every 10 days, as the current plans envision, Luxembourg Prime Minister Jean-Claude Juncker replied: "They will have to do so."
Belgian Finance Minister Didier Reynders said: "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," he said. "This is something that affects me greatly," said Mr Juncker, who also chairs the meetings of the 17 eurozone finance ministers. "You look at the reaction of the people on the streets. You see they are rebelling."
A statement issued by the ministers called on all political parties in Greece to: "support the programme's main objectives and key policy measures to ensure a rigorous and expeditious implementation". The EU's economic and monetary affairs commissioner Olli Rehn said he was "certain that Greece will be able to take the decisions needed because the alternative is so much worse."
"Given the length, magnitude and nature of required reforms in Greece, national unity is a prerequisite for success," it added. Mr Juncker said that as long as the Greek parliament supported the new measures, he was certain Greece would get a second bail-out.
The ministers also concluded that because Greece was unlikely to return to the commercial money markets by early 2012, a second bail-out would be needed. New aid
A new bail-out package about the same size as the first was agreed in principle by EU finance ministers on Sunday.
The new aid package, to be outlined by early July, will include loans from other eurozone countries.The new aid package, to be outlined by early July, will include loans from other eurozone countries.
'Roll-overs'
It is also expected to feature a voluntary contribution from private investors, who will be invited to buy up new Greek bonds as old ones mature.It is also expected to feature a voluntary contribution from private investors, who will be invited to buy up new Greek bonds as old ones mature.
Mr Juncker said that money had to be freely given - or it would be seen as a technical default on debt repayments: "It is absolutely clear that no pressure will be put on the financial institutions, so as to avoid a Greek selective default. Voluntary means voluntary."Mr Juncker said that money had to be freely given - or it would be seen as a technical default on debt repayments: "It is absolutely clear that no pressure will be put on the financial institutions, so as to avoid a Greek selective default. Voluntary means voluntary."
But political pressure is being applied to the commercial banks, with Germany in particular keen to see them share the burden. If Greek were to default - or seen to be in default - it would mean massive losses for European banks that hold Greek debt, including the European Central Bank.
A finance policy expert from German Chancellor Angela Merkel's party called for the government to ensure that private creditors participate as much as possible in a second Greek aid package.
Klaus-Peter Flosbach, spokesman for the Conservatives in parliament, said: "The coalition agreed to only approve financial help for Greece if there is an appropriate involvement by private creditors and we are sticking to that."
Officials said the new plan was expected to fund Greece into late 2014 and total about 120bn euros.Officials said the new plan was expected to fund Greece into late 2014 and total about 120bn euros.
The European Commission has also confirmed that inspectors from the European Union and International Monetary Fund will visit Athens on Tuesday.
"They will be here Tuesday and Wednesday at least," said Carlos Martin Ruiz de Gordejuela, press officer for the European Commission representation to Greece.
Mr Ruiz de Gordejuela said that it would be a "technical mission" adding that the composition of the mission had not been decided and he could not say what its objective would be.