EU Official Expects Euro Zone to Agree on $17 Bn Loan for Greece

Posted June 16th, 2011 at 11:05 am (UTC-5)
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A senior European Union official says he expects the 17-nation eurozone to provide debt-ridden Greece with another $17 billion to prevent a Greek debt default that could further destabilize global financial markets.

EU Economic Affairs Commissioner Olli Rehn said Thursday he is “confident” that eurozone finance ministers will agree to disburse the funds at a meeting that begins Sunday. The funds would represent the latest installment of a $160-billion bailout package offered to Greece last year by the European Union and International Monetary Fund.

Both organizations previously said the Greek parliament must approve further austerity measures this month before the loan can be disbursed. Greek Prime Minister George Papandreou has asked parliament to approve new tax hikes, spending cuts and state asset sales, but the measures have provoked outrage from many Greeks who say they have sacrificed enough.

Greece has warned that it may default on its debt unless it secures the $17-billion loan installment next month.

EU officials have been discussing the terms of a second bailout for Greece to keep the eurozone member's economy afloat in the longer term. But Rehn says no decision is expected on that issue until July at the earliest, due to disagreements about the role of the private sector in a new rescue package.

But Mr. Papandreou is facing growing dissent from Socialist lawmakers who called an emergency party meeting on Thursday to discuss his handling of the crisis. Two ruling party deputies also resigned in protest at the collapse of talks Wednesday with opposition conservatives on forming a unity government. The vacated seats will go to fellow Socialists and will not affect the ruling party's slim five-seat majority in the 300-member parliament.

Mr. Papandreou said Wednesday he plans to reshuffle his Cabinet to help push his austerity package through parliament. He announced the plan after the collapse of the unity government talks.

The Greek parliament is expected to hold a confidence vote within days of the new government being announced.

French President Nicolas Sarkozy said Thursday EU members must do everything necessary to help Greece and safeguard the stability of the euro.

IMF official Zhu Min said the lending agency is concerned about the situation in Greece and is ready to provide support. Zhu is a special adviser to the IMF managing director.

Tens of thousands of Greeks rallied Wednesday in Athens and Thessaloniki to oppose the government's new austerity plans. Some protesters in Athens tried to form a human chain around parliament to prevent debate on the program, but police set up barricades to allow lawmakers to enter the building.

The protest in Athens' Syntagma Square turned violent when riot police fired tear gas at demonstrators who threw stones and fire bombs. Authorities said dozens of people were injured and at least 16 protesters were arrested.

Major Greek labor unions also staged a general strike Wednesday, crippling the country's public transit, media and state-run hospitals.