Greek bailout decision delayed
Eurozone delays until October a decision on $11bn of bailout loans blocked amid checks on Greek promises of reforms.
Eurozone governments have delayed until October a decision on $11bn of bailout loans blocked amid checks on Greek promises of reform, eurozone chief Jean-Claude Juncker said on Friday.
Juncker, who is also the Luxembourg prime minister, made the announcement at a news conference in Wroclaw, Poland on Friday after talks among the 17 euro currency partners.
“We will decide on the disbursment of the next tranche of the Greek adjustment pogramme in October,” Juncker said.
Juncker said the Eurogroup “recognised significant efforts made by the Greek authorities over the last year,” but said the “continued full implementation of the adjustment programme remains crucial”.
He said Greek Finance Minister Evangelos Venizelos reiterated his country’s promises to meet targets in terms of budget and economic reforms, and “therefore we welcomed the renewed firm commitment of the Greek authorities to fully and decisively implement” the changes.
Timothy Geithner addressed the meeting of European finance ministers, after a rare invitation was extended to the US Treasury Secretary.
Geithner urged ministers to leverage their bailout fund to better tackle the debt crisis, but there was no agreement on what steps should be taken.
In a 30-minute meeting with the ministers, Geithner pressed for the $600bn European Financial Stability Facility (EFSF) to be scaled up to give greater capacity to combat the problems infecting Greece, Portugal, Italy and other states, a senior eurozone official familiar with the discussion said.
Austrian debate
Austria’s ruling parties said on Friday that they will request an extraordinary parliamentary session on September 30 to debate additional aid to Greece.
Vienna sparked market fears earlier this week that it might not approve the aid as planned after opposition parties prevented a parliamentary finance committee from debating the issue.
Now the committee will debate the rescue package on September 27, so that it can go before an extraordinary parliamentary session on September 30, according to Karlheinz Kopf, head of the ruling People’s Party’s parliamentary faction.
The conservative party’s coalition partners, the Social Democrats, confirmed the dates.
Under a new plan agreed with eurozone leaders in July, Austria is to increase its contribution of state guarantees to the EFSF to $29.6bn.
Central banks
On Thursday, five central banks acted to offer three-month US dollar loans to mainly European commercial banks in order to prevent money markets from freezing up because of the continent’s sovereign debt crisis.
The European Central Bank said that it would hold three fixed-rate operations between October and December to offer banks as many dollars as they needed, in order to ease any funding crunch in the year-end period.
The ECB said it was acting in co-ordination with the US Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank.
The ECB’s move to make funds available came as Christine Lagarde, the managing director of the International Monetary Fund, warned of a “dangerous” new economic phase during a speech in Washington.
Lagarde said “uncertainty hovers over sovereigns across the advanced economies, banks in Europe, and households in the United States, without collective, bold, action, there is a real risk that the major economies slip back instead of moving forward”.
She said that “political dysfunction” and indecision were increasing the risk of major economies falling back into recession.
Some European banks have struggled to obtain dollar funding in recent months as lenders have become increasingly nervous about the eurozone debt crisis and the global economic slowdown.
Central banks carried out similar action to boost the liquidity of commercial lenders at the height of the financial crisis in 2008.
During her speech in Washington, Lagarde also termed a statement issued after a summit between George Papandreou, the Greek prime minister; French President Nicolas Sarkozy; and German Chancellor Angela Merkel “a clear indication from them … that the future of Greece is in the eurozone”.
She said the statement following the summit “echoes” commitments made by eurozone members on July 21 to continue to support Greece in the face of fears that it may default on hundreds of billions of euros in sovereign debt.