Global General

European leaders OK bailout aid for Greece

By Roddy Thomson (China Daily/Agencies)
Updated: 2011-06-25 09:45

Greek police officers demonstrate in central Athens on Thursday. About 3,000 police officers, coast guards and firefighters marched through central Athens to protest government cuts to salaries and budgets amid worries of additional rollbacks they say they can't afford. Petros Giannakouris / Associated Press

BRUSSELS - European leaders dug out a fresh rescue for debt-ridden Greece late on Thursday to avoid global financial chaos, but on the condition that Athens rally parliamentary support for new austerity measures.

As negotiators for the European Union and the International Monetary Fund struck agreements with the Greek government on spending cuts and tax rises worth 28 billion euros ($39.7 billion) and plan to bring in tens of billions or euros from the sale of state holdings, Athens formally requested financial aid during a two-day summit in Brussels.

Greek lawmakers must pass the new austerity plan before June is out, letting eurozone finance ministers "complete work on outstanding elements to allow the necessary decisions to be taken by early July".

With the bloc under US pressure to avert financial market contagion, Greek Prime Minister George Papandreou said: "We've got the support of our partners, and I think this is not only a green light but also a positive sign for the future of Greece."

EU President Herman Van Rompuy said the new rescue demanded by worried international partners should allow initial "disbursement in time to meet Greece's financing needs in July".

That means a 12-billion-euro tranche of eurozone and IMF loans from last year's 110-billion euro bailout, which Greece needs to avert default in July and which was blocked pending the vote in the Greek parliament.

The EU leaders called on "all political parties in Greece to support the program's main objectives," saying "national unity is a prerequisite for success".

Papandreou has a slim, five-seat majority in the Greek assembly and on Thursday Greek unions announced a general strike, starting on Tuesday, timed to coincide with the vote.

Finance ministers from the 17-nation eurozone meet again on July 3 - days ahead of a deadline for Greece to repay maturing debt or face default.

Greek authorities settled their new budgetary plans during negotiations in Athens with the European Commission, the European Central Bank and the IMF, and Papandreou promised "radical changes to make our economy viable".

He added: "This is a fight for the Greek people, this is a fight for Greece, for our country, but it's also a fight for a common European currency and a common Europe."

"There is a very strong determination among the member states to save what we have done since 50 years all together," French Foreign Minister Alain Juppe said, telling the British Broadcasting Corp of fears the eurozone might implode should Greece be allowed to default.

The commission said the deal in Athens to close the fiscal gap expected for the years 2011 to 2014 now has to be "translated into concrete legislative measures".

Greek opposition leader Antonis Samaras said beforehand he opposed "more taxes in an economy in unprecedented depression," but German Chancellor Angela Merkel urged his party "to accept its historic responsibility".

US Federal Reserve chief Ben Bernanke had warned that failure to act swiftly "would pose threats to the European financial systems, the global financial system and to European political unity".

Those remarks followed scathing comments from US Treasury Secretary Timothy Geithner and IMF fears of "large global spillovers".