Eurozone readies new Greek loans

By Roddy Thomson ,AFP

BRUSSELS — European finance ministers were expected to sign off on billions in loans for Greece Friday amid mounting international pressure on the eurozone to stave off a global recession. The decision on new loans, due from 2:00 p.m. (1200 GMT), follows a video conference overnight between U.S. President Barack Obama, British Prime Minister David Cameron, and the key eurozone duo of German Chancellor Angela Merkel and French President Nicolas Sarkozy. As deep differences between Paris and Berlin dampen hopes of a quick fix to Europe’s debt crisis, the White House said Merkel and Sarkozy “fully understand the urgency of the issues in the eurozone,” and are “working diligently” towards a “politically sustainable” solution. Rifts between the European Union’s two powerhouses are delaying efforts to stem global fallout from the crisis. A lasting game plan had been expected at a Sunday summit but suddenly a fresh summit had been called for Wednesday. A green light for the latest Greek loan tranche will mark the first concrete outcome from a marathon series of meetings on the debt crisis that culminate with back-to-back summits on Sunday and Wednesday, when leaders are hoping to take decisive action all round. The 8 billion euros (US$11 billion) in loans have been frozen for the last couple of months as European Union and International Monetary Fund (IMF) auditors tried to agree on Greece’s debt sustainability — how much of its 350-billion-plus debt mountain can be written off without causing havoc. EU finance, foreign and prime ministers are gathering over the next days to agree ways of ramping up rescue funding to cover not only Greece, but Italy, the third-biggest eurozone economy. Rome in return is under pressure, senior EU figures have said, to present a raft of new budget and reform measures in return. In Washington, the White House said Britain, France, Germany and the United States would continue to consult closely ahead of a G-20 summit in Cannes, France, early next month. “We have made enormous progress but not enough to take final decisions on Friday,” said Steffen Seibert, spokesman for Merkel. “We will have talks on Sunday and we will take decisions on Wednesday,” he said. Increased German parliamentary scrutiny — a condition of legal ratification to a boost of Europe’s rescue fund, the 440-billion-euro European Financial Stability Facility (EFSF) — is also holding up the negotiations. In a complex range of responses to mounting danger, the EU also wants to recapitalize its banks over the next couple of years, primarily if possible via already stretched domestic coffers. The head of Germany’s second-biggest bank warned Friday that eurozone leaders’ hopes of a “voluntary” write-down by private creditors of Greek debt may be exaggerated. “It has to become clear that states have only two options: either they service their debt as agreed or they declare insolvency with all the tough consequences,” Commmerzbank chief Martin Blessing told the mass-circulation German daily Bild. Asked whether banks would voluntarily contribute to resolving the crisis, Blessing replied: “As I see it that won’t happen voluntarily, but only if Greece declares itself insolvent.”

With French banks the most exposed, Paris wants a strengthened EFSF to be able to draw on European Central Bank (ECB) funds to fix the hole in lenders’ balance sheets. But Germany is firmly against that option, with EU Economic Affairs Commissioner Olli Rehn admitting that “a direct link between a refinancing by the European Central Bank and the EFSF could be difficult.”