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EU bailout — the sequel: Greece faces loan default

The European Union is racing to draft a second bailout package forGreece to release vital loans next month and avert the risk of the eurozone country defaulting.

The European Union is racing to draft a second bailout package for Greece to release vital loans next month and avert the risk of the euro zone country defaulting, EU officials said yesterday.



“I am quite optimistic,” the chairman of euro zone finance ministers, Jean-Claude Juncker, said after discussing further aid for Athens with French President Nicolas Sarkozy.



A total restructuring of Greece’s massive debt was not an option, he said, leaving the door open to some tweaking of Greece’s debt profile that might involve the private sector.



Greece’s conservative opposition meanwhile demanded lower taxes as a condition for reaching a political consensus with the Socialist government on further austerity measures, which Brussels says is essential to secure any further assistance.



Moves to plug a looming funding gap for 2012 and 2013 were accelerated after the International Monetary Fund said last week it would withhold the next batch of aid due on June 29 unless the EU guarantees to meet Athens’ funding needs for next year.



Senior EU officials held unannounced emergency talks with the Greek government over the weekend, an EU source said.



Greece took a $158 billion rescue package from the EU and IMF last May, but has since fallen short of its deficit-reduction goals, raising the risk of default on its 327 billion euro debt — 150 percent of its economic output.

 
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