Europe’s Finance Chiefs Approve New Greek Bailout Payment

Posted October 21st, 2011 at 3:05 pm (UTC-5)
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Greece moved a step closer Friday to securing an $11 billion segment of its 2010 international bailout to keep it from running out of money next month and defaulting on its financial obligations.

Finance ministers from the 17 European nations that use the euro approved release of the money within a month. That leaves only the International Monetary Fund to sign off on the payment, part of debt-ridden Greece's $159 billion bailout.

Payment of the additional aid has been blocked for weeks as Greece struggled to meet the demands of its international creditors for new austerity measures to increase taxes and trim government spending. Greek lawmakers approved the hugely unpopular deficit-cutting plan Thursday, even as violent protests against it extended for hours on Athens streets outside Parliament.

The finance chiefs' action on Greece came as they met in Brussels in another attempt to settle differences about how to handle the continent's burgeoning debt crisis. European leaders are holding two summits in the coming week — Sunday and again next Wednesday — to consider their options to stabilize banks faced with massive losses on Greek debt and boost the eurozone's bailout fund.

Germany and France, with Europe's two biggest economies, are key to the talks. But so far, German Chancellor Angela Merkel and French President Nicolas Sarkozy have been unable to reach accord on a common plan. They are set to meet Saturday ahead of the first summit.

France is seeking to turn the continent's bailout fund into a bank that would have access to vast sums of credit from the European Central Bank. But Germany has balked, contending it would diminish the bank's impartiality. Meanwhile, Germany is advocating that private European banks assume bigger losses on their Greek debt, while France and the continent's central bank say that would weaken these banks and lead to further turmoil on the world's financial markets.

The European leaders had hoped to present a comprehensive plan to resolve the debt crisis at the Sunday summit. But late Thursday, Mrs. Merkel and Mr. Sarkozy concluded they would not be able to resolve the stalemate by then and called for the second summit. They said all aspects of the debt contagion would be “profoundly examined” at the Sunday summit, with adoption of a plan no later than Wednesday.

German Finance Minister Wolfgang Schaeuble said “the situation is serious” and that the eurozone finance chiefs have “a great responsibility” to help resolve it.

One of Europe's leading bankers, Commerzbank chief Martin Blessing in Germany, said Greece should declare itself bankrupt and restructure its debt. He said European banks won't voluntarily accept bigger losses on their Greek debt unless the country acknowledges it is insolvent.