Fri, Jun 24, 2011 - Page 6 News List

Greece to be top issue at European leaders’ summit


Greece’s financial meltdown is set to overshadow yet another summit of EU leaders, who yesterday were to discuss new ways to get the country back on its feet and protect the euro’s stability.

Eurozone governments earlier this week delayed any final decisions on new aid for Greece until July 3, when they will know whether the parliament in Athens backs massive new budget cuts, privatizations and economic reforms.

However, the first victim of Europe’s debt crisis was still to dominate discussions yesterday.

European Commission President Jose Manuel Barroso was to urge leaders to help Greece access billions of euros in EU development funds to create jobs and make its businesses more competitive.

The funds are designed to help underdeveloped regions catch up with richer parts of the 27-country EU. About 15 billion euros (US$22 billion) are still available for Greece until 2013, but the country is struggling to prove it can use them efficiently and come up with its part of the financing.

However, Barroso’s last-ditch attempt to sweeten the new austerity measures faces serious headwinds, because some countries are reluctant to make any concessions before the parliament vote.

“We are ready to look into it in a constructive way, how we can do something in a wise manner,” a German government official said. “But the precondition is that the austerity measures pass the Greek parliament before.”

The official declined to be named in line with department policy.

Other, poorer countries that are having similar troubles accessing EU funds are likely to frown at any softening of the rules for just one country.

Leaders will also take another look at the ministers’ decision to ask banks and other private creditors to share the burden of a second bailout for Greece, on top of the 110 billion euros the country was granted a year ago.

Discussions with banks, led by the national finance ministries, have already started, the German official said, adding the eurozone was in close talks with rating agencies and the European Central Bank to avoid triggering a negative rating.

Having rating agencies declare Greece to be in partial default of its debts could spark panic on financial markets and hurt Greek banks as well as other struggling countries.

EU President Herman Van Rompuy will also make a push for eurozone leaders to give an even clearer sign that they are ready to fund a second rescue package as long as Greece manages to push through the new measures.

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