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posted: 7/1/2011 12:16 PM

Eurozone delays decision on new Greek bailout

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Associated Press

BRUSSELS -- Eurozone finance ministers have canceled a crisis meeting planned for Sunday because they need more time -- as much as two months -- to nail down the details of a second bailout for Greece, officials said Friday.

They will, however, hold a video conference on Saturday to sign off on a new loan installment that will keep Greece from bankruptcy over the summer.

Whereas the payout of the next loan installment from Greece's first bailout was a near certainty after Athens voted through new austerity measures this week, discussions on a second rescue package that would support Greece possibly until 2014 are far from resolved.

With investors still wary about Greece's massive debt load -- some 160 percent of GDP -- and flagging economy, the country needs a second bailout, probably about the same size as the euro110 billion it was granted a year ago.

"There is no readiness -- as yet -- to make decisions on additional finances and this new program for Greece," Finnish Finance Minister Jutta Urpilainen told reporters in Helsinki.

She added the final call on the new program may have to wait until the end of the summer or early autumn. A eurozone official, who declined to be named, said the bailout package would have to be ready by the time Greece needs its September loan installment.

The EU's Monetary Affairs Commissioner Olli Rehn also confirmed discussions on the new package could drag on for several more weeks. That means finance ministers would miss the July 11 deadline, the date of their next meeting by which time Rehn had said he wanted a deal.

"A key question, to a large extent, will be how decisions are made concerning the responsibility of private investors," Rehn said told Finnish YLE Radio News. "That requires fairly fundamental preparation."

French and German banks earlier this week indicated that they would support a second program of rescue loans for Greece by buying new Greek bonds when their existing ones expire. Such a voluntary rollover would lower the total amount of money other eurozone nations and the International Monetary Fund have to lend the country over the coming years as it tries to reform its struggling economy.

However, eurozone finance ministries, which are leading the discussions with the banks and other private investors, are struggling to come up with terms for a rollover that won't trigger a negative decision from rating agencies. The European Central Bank and other market observers have warned that even a partial default rating for Greece's debt could roil financial markets, hurt Greek banks and drag down other struggling European countries.

A Greek finance ministry official said that getting the go-ahead already on Saturday for the next euro12 billion loan installment, without which the country would default on its debts in July, was good news.

"It is good that the Eurogroup procedure is being sped up," said the official. "The voting of the midterm program and the implementation bill is acting internationally in favor of the country's credibility and is the basis for tomorrow's discussion at the Eurogroup."

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