European Union leaders expressed confidence Monday at a meeting in Luxembourg that Greece will concede on the necessary economic reforms in order to receive the next tranche of aid due and avoid default.
A formal decision to disburse EUR12 billion to Greece should be taken by early July, after the Greek government commits to a new austerity package, said Eurogroup President Jean-Claude Juncker, who also serves as prime minister of Luxembourg, and European Union Economic Affairs Commissioner Olli Rehn. The Eurogroup will convene on July 3 for an extraordinary session to tackle the issue.
“These measures should ensure that Greece continues to correct its public finances and reform its economy to create the conditions for sustainable growth and job creation,” said Rehn.
Euro-zone finance ministers also agreed Monday that the “preferred creditor status” for the currency area΄s permanent rescue fund as of 2013, the European Stability Mechanism, be dropped for countries already participating in a bailout program.
There were fears this status would disincentivize private investors from buying the bonds because the euro-zone institution would be paid first in the case of default.
“It΄s good news for Greece. It΄s good news for Ireland. It΄s good news for Portugal,” said Juncker.
The ministers agreed on a treaty for the mechanism, paving the way for national governments to vote in the coming days.
Leaders repeated that access to the ESM will come with strict conditions and that private creditors will play a role.
Private sector involvement “will be the rule” for the ESM, said Klaus Regling, head of the European Financial Stability Facility, the ESM΄s precursor.
However, leaders added that private investor involvement in Greece΄s rescue will be voluntary to avoid default.
(source: Dow Jones)
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