EU ministers postpone €12 billion Greece loan until further cuts

The ministers said they expected to pay the latest tranche of a €110 billion EU and IMF aid package by mid-July. But it will depend on the Greek parliament passing €28 billion of new spending cuts and economic reforms.

After a seven-hour meeting in Luxembourg that ended early on Monday, the finance ministers said they would not approve the disbursement to Greece of the €12 billion (€8.7bn from eurozone governments and €3.3bn from the IMF) until the country's parliament passed the fiscal strategy and privatisation laws.

The ministers also committed to put together a second bail-out package to keep the country afloat.

Jean-Claude Juncker, Luxembourg’s prime minister who chairs the meetings of the 17 eurozone finance ministers, said that as long as the Greek parliament supported the new measures, he was certain Greece would get a second bail-out.

The latest public opposition to the cutbacks, which include pay and pension cuts, involve Greek workers at the state-owned electricity company, who are on the first day of a 48-hour strike.Athens has said it needs the €12 billion from the existing package by July to avoid defaulting on its debt.

Belgian Finance Minister Didier Reynders said the release of that would depend on the Greek Prime Minister, George Papandreou, surviving a confidence vote on Tuesday. “To move to the payment of the next tranche, we need to be sure that the Greek parliament will approve the confidence vote and support the programme, so the decision will be taken at the start of the month of July,” he said.

Greece’s new finance minister, Evangelos Venizelos, issued a statement from Luxembourg saying that in contrast to Ireland and Portugal “who appear to have a high degree of internal political consensus” Greece’s national unity has become “a prerquisite for our partners where it should have been as the nation’s self-preservation instinct.”

Venizelos said the overriding aim was to develop a clear relationship of trust before the disbursement of the fifth installment. “We have plenty to do, on a daily basis. The political time has been compressed a lot; each day is of extreme importance and hence we cannot afford to waste a single hour.”

The eurozone also expected to feature a voluntary contribution from private investors, who will be invited to buy up new Greek bonds as old ones mature.

The agreement came after the eurozone ministers held a conference call with other members of the G7 group of rich industrialised nations.

The European Commission has also confirmed that inspectors from the European Union and International Monetary Fund will visit Athens on Tuesday.