Euro-Area Finance Chiefs Approve Sixth Aid Payment to Greece

Bloomberg
October 21, 2011

Euro-area finance ministers signed off on a 5.8 billion-euro ($8.1 billion) loan to Greece under last year’s bailout as European leaders reopened talks on a new aid package that will involve writedowns on Greek debt.

The green light for the sixth disbursement of funds under the fully taxpayer-funded package of 110 billion euros shifted the spotlight to the role of bondholders in a bigger second rescue for Greece.

The euro area wants investors to contribute more than the 21 percent writedown on debt they agreed to in July, when leaders approved the new 159 billion-euro package. That was to include 50 billion euros from bondholders.

“We have agreed to endorse the disbursement of the next tranche of financial assistance to Greece in the context of the current economic adjustment program,” the 17 euro-area finance ministers said in a joint statement today in Brussels. “To ensure debt sustainability, we will conclude a second economic adjustment program for Greece, with an appropriate combination of additional new official financing and private-sector involvement.”

Greek Prime Minister George Papandreou won a parliamentary vote for new pension and wage cuts and tax increases yesterday in Athens to close a budget gap and secure the loan. He got backing for the bill as European leaders, already due to meet on Oct. 23, announced a second summit for Oct. 26 to give them more time to work on a strategy to combat the Greece-triggered debt crisis that continues to roil global markets.

More