New Greek rescue plan could face delays: report

7th June 2011, Comments 0 comments

Approval of a second rescue plan for Greece might be delayed until later this year because of resistance within the 17-nation eurozone, a German newspaper said on Tuesday.

A meeting of eurozone finance ministers on June 20 could fail to reach an agreement on further funding for Greece, which is estimated to need at least another 60 billion euros ($88 billion), the business daily Handelsblatt said.

In Athens, meanwhile, a senior IMF oficial said that the release of the next slice of the first vital rescue loan for Greece from the IMF and EU would depend on EU ministers taking tough decisions at a meeting at the end of June.

The Handelsblatt report here on the second rescue scheme quoted a "high-ranking European diplomatic source."

The daily's online edition underscored particularly strong opposition from Slovakia, a recent eurozone member from eastern Europe which expressed reserves in the past to providing Greece with financial support.

Some banks, notably in Germany, are also said to be resisting a "voluntary gesture" floated by European leaders that would have banks and other investors roll over Greek sovereign bonds as they matured to give Athens breathing space.

"The banks flatly refuse," Handelsblatt quoted a European government official as saying.

Authorities in Berlin have made private sector participation in future Greek rescue plans an essential condition for asking taxpayers to put up more money.

Greece already benefits from a support package worth 110 billion euros backed by the European Union and International Monetary Fund.

The European Central Bank has also taken exceptional measures to ensure Greek commercial banks have access to funds needed to keep the economy running.

Athens has run up debt of around 350 billion euros, and is being pressed to step up a privatisation programme experts estimate could earn a total of around 300 billion euros if carried out completely.

On Monday, ECB executive board member Lorenzo Bini Smaghi warned that forcing banks to contribute to a Greek bail-out should only be a measure of last resort.

He argued that "preventive" restructuring of Greece's sovereign debt also "favours short-term speculation over long-term investment" and becomes "a way to punish patient investors who are sticking to their investment."

An automatic restructuring of Greece's debt would also discourage new investments in other countries implementing adjustment programmes such as Ireland and Portugal, the ECB executive said.

© 2011 AFP

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