Eurozone finance ministers said early on Sunday they wanted to see Greece adopt tough austerity measures before committing to aid to save the country from default, and they agreed to ask private lenders to contribute “voluntarily” to the rescue effort.
“Ministers decided to define by early July the main parameters of a clear new financing strategy,” read a statement from the Eurogroup panel of Eurozone finance ministers, which was issued after six and a half hours of crisis talks in Luxembourg.
The decision means Greece will not be able to count immediately on the 12 billion Euros it needs by mid-July to stave off insolvency. The money is part of the 110-billion-Euro bailout package the country secured last year.
“To take the decision... we first need the Greek parliament to take its decision,” Belgian Finance Minister Didier Reynders said, referring to a confidence vote Greece’s newly reshuffled government faces on Tuesday and approval by the end of the month of new austerity cuts.
“I cannot imagine for one second that we will commit to finance Greece without knowing that the Greek parliament has voted,” Eurogroup President and Luxembourg Prime Minister Jean-Claude Juncker said.
Greece’s new finance minister, Evangelos Venizelos, said he came to Luxembourg to reiterate “strong commitment” to the austerity programme. The Eurogroup renewed calls to the country’s conservative opposition to also support it.
Dutch Finance Minister Jan Kees de Jager warned that his country would disburse no money if the Greek parliament did not approve the cuts, which are worth 28 billion euros. Privatization is expected to generate an additional 50 billion euros.
Underscoring the global relevance of the crisis, non-eurozone members of the Group of Seven (G-7) — the United States, Canada, Japan and Britain — were involved via conference call in part of the discussions, an EU diplomat said.
In a meeting started at 1700 GMT, the Eurogroup, European Central Bank (ECB) and International Monetary Fund (IMF) officials also discussed the second rescue package of up to 120 billion euros needed to keep Greece solvent beyond 2012, when the current aid tails off.
Negotiations have been complicated by German-led demands that private lenders should contribute to it.
“It has to be made clear that the risk will not be carried unilaterally and alone by the community of taxpayers,” German Finance Minister Wolfgang Schaeuble, who represents the eurozone’s largest paymaster, said as he arrived in Luxembourg.
In its final statement, the Eurogroup endorsed a deal reached Friday by German Chancellor Angela Merkel and French President Nicolas Sarkozy to make private lenders’ participation “voluntary.” Funds for the new bailout will come from “both official and private sources,” and “private sector involvement in the form of informal and voluntary roll-overs of existing Greek debt at maturity” will be pursued, ministers said.
Credit rating agencies had warned that a coercive scheme for banks would amount to a default for Greece. In that scenario, the ECB said it would stop accepting Greek bonds as collateral for loans to Greek private banks, which would precipitate a banking crisis.