News / Europe

Europe Wavers on Terms of Second Greek Bailout

Greek Finance Minister Evangelos Venizelos said there have been no discussion of Greece defaulting on its debts during a news conference in Athens, October 4, 2011.
Greek Finance Minister Evangelos Venizelos said there have been no discussion of Greece defaulting on its debts during a news conference in Athens, October 4, 2011.

European leaders are wavering on the terms of their planned second international bailout of debt-ridden Greece because of the country's worsening financial condition.

One key European financial leader, Luxembourg Prime Minister Jean-Claude Juncker, suggested Tuesday that private creditors will have to take bigger losses on the Greek loans they hold, part of the $211 billion bailout approved in July, on top of last year's $159 billion in international assistance. The private Greek bond holders were originally targeted for 21 percent losses on their investments, but some analysts say the figure could rise to 50 percent.

Juncker said Greece's financial plight had worsened since mid-summer, but declined to elaborate exactly how the bailout terms might be altered. Meanwhile, European finance ministers put off a decision on whether to hand Greece another $11 billion segment of last year's bailout after the Athens government conceded this week that it would not meet deficit targets it agreed to with its international creditors.

For weeks, Greece has said that without a cash infusion it could default this month. But Greece said Tuesday the country can survive financially until mid-November.

Greece's finances have roiled world financial markets for weeks, as investors worry about the effects of a possible Greek default. International investment banker Goldman Sachs cut its estimate of global economic growth and predicted recessions in Europe's two largest economies, Germany and France.

Asian and European stock markets plunged for the second straight day Tuesday, with indexes in London, Paris and Frankfurt all falling about 3 percent or more.

Some countries in the 17-nation bloc of countries that use the common euro currency, especially in northern Europe, have voiced increasing discontent with providing more aid for Greece. One of them, Finland, won a small concession from the continent's finance ministers, allowing it to require Greece to post collateral before Helsinki would agree to hand the Greek government more money.

Finland will get Greek bonds as collateral, but may not be able to collect proceeds from them for as much as 30 years.

Greece has imposed a series of austerity measures, including spending cuts and tax hikes. Many Greeks are weary of the new measures, however, that have eliminated government jobs and cost them more money.

The government's proposed 2012 budget includes elimination of 30,000 more government jobs by the end of next year.

Some information for this report was provided by AP, AFP and Reuters.

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