Greek bailout loan decision pushed to October

Greece's international rescue partners will delay until October their decision on paying out a batch of bailout loans needed to keep Athens from a disastrous bankruptcy, the head of the eurozone finance ministers' group said Friday.

The announcement at the meeting in Wroclaw, Poland, was yet another example of Europe's halting effort over almost two years to solve its crisis over too much government debt in some countries.

U.S. Treasury Secretary Timothy Geithner had joined the meeting -- a first for the U.S. finance chief -- in a sign of how the U.S. is getting increasingly concerned over the global impact of the eurozone debt crisis.

But the participants appeared unable to make progress on any front.

The European finance chiefs ruled out providing more fiscal stimulus to get their lackluster economies growing again, saying high debts left no space for extra spending. Another sticking point in the aid for Greece, a Finnish demand for collateral for a second bailout now being put together, was not solved either.

The next€8 billion ($11 billion) installment of Greece's first bailout package depends on a review of the country's finances. The payout was originally scheduled for end-September and the Greek government has said that without the new loan it will run out of money next month, forcing it to stop paying public-sector salaries and eventually default on its massive debts.

But officials from the eurozone and the International Monetary Fund have delayed their assessment until Greece has laid out a clear plan on how it will cut its deficits to targets agreed in its bailout program, said Jean-Claude Juncker, the prime minister of Luxembourg who also chairs the regular meetings of eurozone finance ministers.

Juncker said officials welcomed "the renewed, firm commitment of Greece" to its austerity program and said they "would decide in October on the next tranche."

A delegation from the eurozone, the IMF and the European Central Bank unexpectedly left Athens on Sept. 2, delaying the much-awaited confirmation that Greece was meeting the terms of its euro110 billion ($152 billion) bailout agreed in May, 2010.

The country's struggle to keep a lid on its spending and raise enough revenue has also increased uncertainty about a second euro109 billion aid package agreed in July, when it became clear that the first batch of money would not be enough.

Fears that Greece might not get more rescue money and default have made Greek bond prices plummet, weighed on the euro's exchange rate with the dollar and roiled stock markets.

Austria's Finance Minister Maria Fekter, traditionally a hard-liner when it comes to sticking to the bailout conditions, said she was "very optimistic that the next tranche can be paid out to Greece."

She warned against a Greek default, which she said would be "very costly." Yet she did not rule it out as a possibility in the future.

"Should a situation arise, where this way (of providing rescue loans) suddenly becomes more expensive than the alternative, we will have to think about the alternative," Fekter said. "But at the moment this is not yet the case."

Friday's announcement fell short of a complete assurance Greece will get the money and hopes for tangible progress on another obstacle were quickly thwarted, when Finnish Finance Minister Jutta Urpilainen said there was still no solution to her country's demand for guarantees to back its contribution to the second rescue package.

The small Nordic country's demand has triggered similar requests from several other states, including Austria and the Netherlands.

Fulfilling all the requests for collateral could shave off hundreds of millions of euros from the overall bailout sum, hurting Greece's prospects of recovery and angering other eurozone nations who would have to fund the guarantees.

"If collateral will be provided, this will be done at an appropriate price," Juncker said, without giving further details on where discussions were headed.

Friday's meeting comes after several turbulent weeks on global financial markets, triggered by fears over the impact of a potential Greek default as well as mounting evidence of a slowdown of the world economy. Some eurozone banks have been facing difficulties to obtain short-term funding in U.S. dollars as other lenders worry about their exposure of the debt of struggling countries like Greece, Spain or Italy.

Those funding issues pushed the European Central Bank, the U.S. Federal Reserve and three other major central banks to give banks easier access to dollars on Thursday, in the hope they can stop credit from seizing up like it did after the collapse of U.S. investment bank Lehman Brothers three years ago.

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EU leaders reach Greek rescue deal

Greek Prime Minister George Papandreou took part in the bailout talks in Brussels on Thursday.NEW: Bailout for Greece to be funded by the European Union and the International Monetary FundNEW: Deal will save the country 54 billion euros over three yearsPlans were thrashed out by France's Nicolas Sarkozy and Germany's Angela Merkel

(CNN) -- European leaders agreed on Thursday to provide a second bailout package for Greece and drastically expand rescue funds to prevent financial crisis spreading through the eurozone.

European Union president Herman Van Rompuy said the rescue deal would be financed by both the EU and the International Monetary Fund.

European governments and the IMF will contribute a total of 109 billion euros. The private sector's share will amount to 49.6 billion euros.

The deal was reached following an emergency summit of the 17 eurozone nations in Brussels.

The plan is believed to have been thrashed out at a seven-hour meeting on Wednesday between French President Nicolas Sarkozy and German Chancellor Angela Merkel, who buried sharp differences about involving the private sector in the bailout.

According to a draft proposal, obtained by several media organizations earlier on Thursday, the European Union will provide additional loans with longer pay back periods "to decisively improve the debt sustainability and refinancing profile of Greece."

Unless the eurozone finds a way to bring Greece back from the brink of defaulting on part of its $500 billion debts, it is feared that other countries exposed to the debt will begin to experience problems.

Weaker economies such as Italy and Spain -- seen as too big to bail out -- could falter, tearing apart the eurozone, and hurting other nations exposed to the debt take.

Under the draft proposals, loans made by the European Financial Stability Fund, funded by bonds backed by EU members, will now mature in 15 years instead of the current seven-and-a-half. The loans will be available to Ireland and Portugal, which have already been bailed out.

Interest rates will be as low as 3.5%, it said.

The draft dropped earlier plans for a bank tax to raise bailout funds, but revived German calls for private sector involvement -- a move that could risk a Greek default.

The eurozone will use its expanded crisis funds as a short-term guarantee to Greek bonds to prevent wider collapse in the event of a partial debt default in order to prevent wider collapse, diplomats told Agence France-Presse earlier on Thursday.

The euro rose sharply and U.S. and European markets were broadly up following reported details of the draft.

"If this is correct it all looks pretty sensible at first glance," said Gary Jenkins, head of fixed income research with Evolution Securities.

Greece's government is estimated to need more than $200 billion to in addition to a $157 billion rescue package agreed last year to sustain it over the next few years.

EU governments have been at loggerheads about what shape the bailout will take, with some leaders insisting banks and private sector investors should take some of the burden.

Greece has been forced to impose harsh austerity measures, provoking violent scenes of protest, in an attempt to cut its debts. Taxes have been raised and public sector jobs cut. It is also selling off numerous assets.

CNNMoney's Ben Rooney contributed to this story.

Quoting : CNN

European leaders reach deal over Greek debt

Greek Prime Minister George Papandreou took part in the bailout talks in Brussels on Thursday.NEW: Bailout for Greece to be funded by the European Union and the International Monetary FundNEW: Deal will save the country 54 billion euros over three yearsPlans were thrashed out by France's Nicolas Sarkozy and Germany's Angela Merkel

(CNN) -- European leaders agreed on Thursday to provide a second bailout package for Greece and drastically expand rescue funds to prevent financial crisis spreading through the eurozone.

European Union president Herman Van Rompuy said the rescue deal would be financed by both the EU and the International Monetary Fund.

European governments and the IMF will contribute a total of 109 billion euros. The private sector's share will amount to 49.6 billion euros.

The deal was reached following an emergency summit of the 17 eurozone nations in Brussels.

The plan is believed to have been thrashed out at a seven-hour meeting on Wednesday between French President Nicolas Sarkozy and German Chancellor Angela Merkel, who buried sharp differences about involving the private sector in the bailout.

According to a draft proposal, obtained by several media organizations earlier on Thursday, the European Union will provide additional loans with longer pay back periods "to decisively improve the debt sustainability and refinancing profile of Greece."

Unless the eurozone finds a way to bring Greece back from the brink of defaulting on part of its $500 billion debts, it is feared that other countries exposed to the debt will begin to experience problems.

Weaker economies such as Italy and Spain -- seen as too big to bail out -- could falter, tearing apart the eurozone, and hurting other nations exposed to the debt take.

Under the draft proposals, loans made by the European Financial Stability Fund, funded by bonds backed by EU members, will now mature in 15 years instead of the current seven-and-a-half. The loans will be available to Ireland and Portugal, which have already been bailed out.

Interest rates will be as low as 3.5%, it said.

The draft dropped earlier plans for a bank tax to raise bailout funds, but revived German calls for private sector involvement -- a move that could risk a Greek default.

The eurozone will use its expanded crisis funds as a short-term guarantee to Greek bonds to prevent wider collapse in the event of a partial debt default in order to prevent wider collapse, diplomats told Agence France-Presse earlier on Thursday.

The euro rose sharply and U.S. and European markets were broadly up following reported details of the draft.

"If this is correct it all looks pretty sensible at first glance," said Gary Jenkins, head of fixed income research with Evolution Securities.

Greece's government is estimated to need more than $200 billion to in addition to a $157 billion rescue package agreed last year to sustain it over the next few years.

EU governments have been at loggerheads about what shape the bailout will take, with some leaders insisting banks and private sector investors should take some of the burden.

Greece has been forced to impose harsh austerity measures, provoking violent scenes of protest, in an attempt to cut its debts. Taxes have been raised and public sector jobs cut. It is also selling off numerous assets.

CNNMoney's Ben Rooney contributed to this story.

Quoting : CNN.com