The FINANCIAL — Europe pressed Greece to deliver drastic new austerity cuts, says EU Business web-site, but expressed confidence that fresh loans can be released early next month.
According to the edition, amid mounting fear of contagion affecting other eurozone economies, with Italy hit on markets as it hastens its own austerity package, Luxembourg Prime Minister Jean-Claude Juncker said Greece has no option but to deliver on the demands made by its international backers.
After the first presentation by new Greek finance minister Evangelos Venizelos on Sunday night — during which diplomats said he got short shrift over a request to re-negotiate bailout terms — Juncker said Monday that a new rescue was on course for the autumn.
"The minister is sincere, honest and credible," Juncker said. "Greece will not be abandoned by its partners in Europe, it knows what has to be done.
"The Greek parliament has to know this has to be done," he said of a vote required to pass another 28.4 billion euros of fiscal belt-tightening into legislation.
"If not…," he slammed his fist down on the press conference table amid criticism of the lack of a 'Plan B' for Greece.
However, he quickly underlined: "But this is not a question will have to face."
Similarly, when asked if he believed the privatisation target was feasable even if it meant one company being sold every 10 days, Juncker stressed: "They will have to do so."
An IMF report released at the same time warned that "with deeply intertwined fiscal and financial problems, failure to undertake decisive action could rapidly spread the tensions to the core of the euro area and result in large global spillovers."
On the eve of a parliamentary confidence vote in Prime Minister George Papandreou's government reshuffle, eurozone finance ministers delayed approval for emergency cashflow aid until the political waters in Greece clear.
A 12-billion-euro loan, part of last year's 110-billion-euro ($156 billion) bailout, is needed to avoid a bottleneck in Athens repayments, but first Greece must sign off on further budget cuts and raising 50 billion euros from privatisations.
New eurozone talks were called on Greece for July 3 to finalise a second rescue package which will follow the payout of the existing loans Ministers also agreed to raise national funding guarantees behind a temporary eurozone lending facility to 780 billion euros between now and the end of 2012.
That will give it the fund an "effective lending capacity" of 440 billion, said European Financial Stability Facility chief Klaus Regling.
The second, 100-billion-euro bailout will then involve taxpayers' money but also a "substantial" contribution from the private sector, although in no way "compulsory," said Juncker.
It will come via the "informal and voluntary rollovers of existing Greek debt at maturity" by private banks, pension funds and insurers.
A Greek finance ministry source told AFP that the government was "confident about the adoption of this plan by parliament" in a vote on June 28. The Socialist administration holds 155 seats out of 300.
Representatives from the European Union, the International Monetary Fund and the European Central Bank will be in Athens on Tuesday and Wednesday for talks with Venizelos, an EU source in Athens also said.
Following protests over the unpopular austerity measures, ministers also stressed the need thereafter for "rigorous and expeditious implementation" of Greek promises.
Showing the extent of international fears over renewed financial contagion, G7 partners in Canada, Japan and the United States were also briefed overnight.
The euro fell against the dollar, while banks bore the brunt of stock losses across Europe.
Italy was one of the worst hit, after its government was forced to speed up preparations for a 40-billion-euro (57-billion-dollar) austerity plan intended to bring its public deficit to just 0.2 percent of gross domestic product (GDP) by 2014.