Europe May Withhold Half of Greek Payment

Bloomberg
June 20, 2011

European governments weighed withholding half of Greece’s next 12 billion-euro ($17.2 billion) aid payment, seeking to keep the country solvent while maintaining pressure on the government to slash the debt that pitched the euro area into crisis.

Euro-area finance ministers may authorize only a 6 billion- euro loan to tide Greece through bond redemptions in July, while further aid hinges on Greek budget cuts, Belgian Finance Minister Didier Reynders said.

“We will in any case try to release the necessary funds for the short term,” Reynders told reporters before a meeting of euro-area finance ministers in Luxembourg that began late yesterday.

Europe’s financial brinksmanship ran in parallel with Greek Prime Minister George Papandreou’s effort to save his government from collapse and win parliamentary backing for spending cuts, tax increases and state-asset sales needed to keep bailout funds flowing.

Spanish Economy Minister Elena Salgado said the focus is still on paying out the full 12 billion euros, telling reporters after four hours of talks: “You can’t divide it.”

Group of Seven finance officials, including representatives of euro members Germany, France and Italy, held telephone consultations during the gathering on the Greek crisis, a U.S. official said.

The euro-area finance ministers’ meeting coincided with the start of a three-day Greek parliamentary debate in Athens over a confidence vote in a new cabinet at what Papandreou called a “critical crossroads.” Papandreou has 155 seats in the 300- seat parliament.

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