Greece: Eurozone ministers delay decision on vital loan

Eurozone finance ministers have postponed a final decision on a 12bn-euro (£10-bn) 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.
But it will depend on the Greek parliament passing 28bn euros of new spending cuts and economic reforms.
The ministers also committed to put together a second bail-out to keep the country afloat over the coming years.

The Greek government expects it to be similar in size to the first one. Athens has said it needs funds by July to avoid defaulting on its debt.
'Traitors!' Earlier, thousands of people gathered outside the parliament building in Athens to oppose any further cuts.
Waving banners and Greek flags, they shouted: "Thieves! Traitors!"

Analysis

Gavin Hewitt BBC Europe editor

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Even if there is another bail-out of around 110bn euros, Greeks have lost faith in the plan. All they see is debt piling on debt.
This is where the danger lies. A creeping despair. Injured national pride. Ten years of austerity.
Even so the bet must be that the Greeks reluctantly, sullenly, will go along with new austerity but I have sensed a despair that last year just wasn't there and no-one knows where that will lead.

• Read Gavin's thoughts in full

Inside, Prime Minister George Papandreou urged MPs to accept his programme of tax increases, spending cuts and privatisation - expected to raise 50bn euros by 2015.

"The consequences of a violent bankruptcy or exit from the euro would be immediately catastrophic for households, the banks and the country's credibility," he said at the start of a three-day debate.
MPs will vote on Tuesday on a confidence motion in Mr Papandreou's cabinet, which he reshuffled last week amid mounting unrest.
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.
"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," said Belgian Finance Minister Didier Reynders.
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".
"Given the length, magnitude and nature of required reforms in Greece, national unity is a prerequisite for success," it added.

Greek bail-out timeline

• May 2010: EU and IMF agree bail-out package to prevent Greece defaulting on its debts; in return, Greece agrees to make 30bn euros of budget cuts over the next three years
• February 2011: EU and IMF experts tell Greece it must make further cuts to keep recovery on track
• April 2011: EU figures reveal Greek deficit revised up to 10.5%, worse than previously thought
• May 2011: Greece begins privatisation programme but is warned the IMF may not release more funds as Athens cannot guarantee it will remain solvent for next 12 months
• 19 June 2011: Deadline for Greece to agree new austerity package

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.

The new aid package, to be outlined by early July, will include loans from other eurozone countries.
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.
"Ministers agreed that the required additional funding will be financed through both official and private sources and welcome the pursuit of voluntary private sector involvement in the form of informal and voluntary roll-overs of existing Greek debt at maturity for a substantial reduction of the required year-by-year funding within the programme, while avoiding a selective default for Greece," the statement said.
Officials told the Reuters news agency that the plan was expected to fund Greece into late 2014 and total about 120bn euros.
This would comprise 60bn euros of official loans, 30bn euros from the private sector, and 30bn euros from Greek privatisation proceeds, reports Reuters.
The agreement came after the eurozone ministers held a conference call with other members of the G7 group of rich industrialised nations.