Bloomberg News

Euro-Area Finance Chiefs May Delay Pact on Greek Rescue to July

June 14, 2011

June 14 (Bloomberg) -- Talks on a second Greek bailout may drag into July, casting doubt on a payment due early next month, as euro-area finance chiefs struggled to break a deadlock over how to enroll private investors in the rescue.

The finance ministers failed to reconcile a German-led push for bondholders to shoulder part of the cost of a new Greek aid package with European Central Bank warnings that such a move might constitute a default. With consensus elusive before the target date of a June 23-24 leaders’ summit, finance ministers will convene again on June 19 in Luxembourg, a day earlier than planned.

“We have to proceed very cautiously,” Luxembourg’s Finance Minister Luc Frieden told reporters after an emergency meeting in Brussels today, adding that “very clearly we have to go into that direction” of a delay to next month. “Several options -- from the IMF, as well as from the European Central Bank and from the European Commission -- still have to be studied.”

Pressure on euro-area governments to craft a rescue plan before their end-of-June goal intensified yesterday after Standard & Poor’s slapped Greece with the world’s lowest credit rating. The focus on averting the euro area’s first sovereign default now shifts to German Chancellor Angela Merkel and French President Nicolas Sarkozy to resolve their differences at a June 17 meeting in Berlin.

“They’ll find a way to make it safe, which is what the ECB and French want, and make it irrevocable and grant more time, which is what Germany wants,” said Gilles Moec, co-chief European economist at Deutsche Bank AG. “There’s no plan B. We have to come up with a solution.”

--With assistance from Rainer Buergin, Lorenzo Totaro, Gregory Viscusi, Jonathan Stearns and Rebecca Christie in Brussels, Brian Parkin in Berlin and Simon Kennedy in London. Editors: Jones Hayden, Patrick G. Henry

To contact the reporters on this story: Alan Crawford in Brussels via acrawford6@bloomberg.net; Stephanie Bodoni in Brussels via sbodoni@bloomberg.net

To contact the editors responsible for this story: James Hertling at jhertling@bloomberg.net; Anthony Aarons at aaarons@bloomberg.net


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