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Euro nations OK $17.4 billion aid payment to Greece

By Jonathan Stearns | China Daily | Updated: 2011-07-04 08:11

BRUSSELS - The euro area approved its share of a 12 billion-euro ($17.4 billion) aid payment for Greece and pledged to complete work in the coming weeks on a second rescue package for the cash-strapped nation to prevent a default.

Finance ministers agreed to disburse 8.7 billion euros of loans under last year's 110 billion-euro bailout by July 15, rewarding Greek Premier George Papandreou for pushing an extra austerity plan through parliament. The International Monetary Fund is due to provide the rest of the July aid installment, the fifth under the 2010 package.

The spotlight now turns to a second bailout to which banks and insurers plan to contribute following German demands for taxpayer relief. Euro-area governments and investors will provide 70 percent of new aid that may total as much as 85 billion euros, with the IMF offering the rest, Thomas Wieser, an Austrian Finance Ministry official, said on June 30.

"The Greek authorities provided a strong commitment to adhere to the agreed fiscal adjustment path," the 17 euro-area finance chiefs said in an e-mailed statement on Saturday after a conference call that was joined by the IMF's acting chief, John Lipsky, and European Central Bank President Jean-Claude Trichet. "The precise modalities and scale of private-sector involvement and additional funding from official sources will be determined in the coming weeks."

Bonds of Europe's most indebted nations rebounded last week after Papandreou's victory in parliament eased concerns about an imminent Greek default. Stocks and the euro rose. Greece's bonds advanced for a second week and Italian 10-year securities gained for the first week in three, while the Spanish 10-year yield declined the most in five months. The two-year Greek yield dropped more than 150 basis points.

The euro rose 2.4 percent against the dollar, its first weekly gain in four weeks, and the Stoxx Europe 600 Index snapped a string of eight straight weeks of losses. The MSCI World Index posted its biggest weekly advance in almost two years.

Europe is trying to draw a line under a debt crisis that Greece sparked more than a year ago and that threatens the 12-year-old monetary union.

Ireland and Portugal sought emergency aid totaling 146 billion euros after the initial bailout of Greece in May 2010,

The political mood in Europe has complicated the task, with a German-led group of richer nations reluctant to offer more aid and opposition to austerity mounting in Greece.

Papandreou shuffled his cabinet last month to fend off a rebellion by his Socialist party and faced demonstrations and strikes last week as Greek lawmakers approved a 78 billion-euro package of tax increases and asset sales.

Bloomberg News

(China Daily 07/04/2011 page14)

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