EUROZONE FINANCE MINISTERS have delayed a decision to release the next €8bn of bailout funds due to be given to the struggling Greek government – but has ruled out allowing the country to default.
At a meeting in Luxembourg last night, the ministers said the idea of Greece reneging on its debt obligations could not be countenanced – but still decided not to authorise the latest batch of loans guaranteed under the country’s first bailout.
Without those funds, the Greek government is set to run out of cash later this month – and would be forced into a default regardless. Eurogroup president Jean-Claude Juncker, said that a decision would be made before Greece’s coffers run dry.
The decision to delay the payments followed the publication by Athens of a draft budget for 2012 – which showed that the government was set to fall short of debt targets laid down by its EU and IMF paymasters.
Ministers are also seeking further cost-cutting austerity drives, and are reported to be seeking a renegotiation of the terms of Greece’s second bailout, in which private bondholders were told to take a 21 per cent ‘haircut’ on their investments.
Juncker, the prime minister of Luxembourg who hosted the meeting yesterday, said nobody at the meeting had advocated a Greek default, and that “everything” would be done to avoid one.
European economics commissioner Olli Rehn indicated that Greece would still ultimately receive the €8bn due, saying its government had already gone a long way to follow the terms of the EU-IMF plan.
Rehn’s native Finland reportedly secured a late-night deal accommodating its previous agreement, where Greece offers it some collateral in exchange for its participation in the second bailout.
That deal had posed a major stumbling block, with other governments including Austria hoping to secure a similar deal in exchange for their participation in the second Greek programme.