Governments, Bankers Work to Rescue Greek Bailout

Posted July 5th, 2011 at 3:35 pm (UTC-5)
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International bankers and European government officials are trying to come up with a financial rescue plan for Greece without creating more problems.

International bankers met in Paris Tuesday and planned more meetings Wednesday after some of the world's top credit rating agencies warned that a French proposal could still leave the Greek economy in trouble.

The French proposal would allow private banks to extend payment dates for loans to the Greek government. The credit rating agency Standard & Poor's warned Monday that even under that plan Greece could be considered in default. Moody's Investors Services said Tuesday banks taking part in the plan could see their own credit rating lowered.

Bankers, talking to media outlets on the condition of anonymity, said the goal of the new round of meetings was to refine the plan to resolve those concerns.

French and German banks and pension funds are the biggest private sector holders of Greek debt, and officials are concerned that any failure by Greece to pay back its loans could spark a larger economic crisis.

Eurozone finance ministers have already cleared the way for Greece to receive another $17 billion by July 15, part of last year's $156-billion bailout from the European Union and the International Monetary Fund.

Officials say that should be enough to help Greece survive for a few more months, before it again runs out of money.

Meanwhile, German Chancellor Angela Merkel Tuesday warned investors to pay less attention to the credit rating agencies and more attention to the International Monetary Fund, the European Bank and the European Commission because they are the ones lending money to Greece.

Also Tuesday, German Finance Minister Wolfgang Schaeuble defended Germany's participation in the Greek bailout. He said bailing out Greece was necessary to stabilize the euro – the common currency used by some of the continent's top economies.

Several economists have appealed Germany's participation, arguing that it breaks German and European laws.