Decision on Greek loan payout delayed to October

WROCLAW, Poland — Greece's international rescue partners will delay until October their decision on paying out a batch of bailout loans needed to keep Athens from a disastrous bankruptcy, the head of the eurozone finance ministers' group said Friday.

The announcement at the meeting in Wroclaw, Poland, was yet another example of Europe's halting effort over almost two years to solve its crisis over too much government debt in some countries.

U.S. Treasury Secretary Timothy Geithner had joined the meeting — a first for the U.S. finance chief — in a sign of how the U.S. is getting increasingly concerned over the global impact of the eurozone debt crisis.

But the participants appeared unable to make progress on any front.

The European finance chiefs ruled out providing more fiscal stimulus to get their lackluster economies growing again, saying high debts left no space for extra spending. Another sticking point in the aid for Greece, a Finnish demand for collateral for a second bailout now being put together, was not solved either.

The next €8 billion ($11 billion) installment of Greece's first bailout package depends on a review of the country's finances. The payout was originally scheduled for end-September and the Greek government has said that without the new loan it will run out of money next month, forcing it to stop paying public-sector salaries and eventually default on its massive debts.

But officials from the eurozone and the International Monetary Fund have delayed their assessment until Greece has laid out a clear plan on how it will cut its deficits to targets agreed in its bailout program, said Jean-Claude Juncker, the prime minister of Luxembourg who also chairs the regular meetings of eurozone finance ministers.

Juncker said officials welcomed "the renewed, firm commitment of Greece" to its austerity program and said they "would decide in October on the next tranche."

A delegation from the eurozone, the IMF and the European Central Bank unexpectedly left Athens on Sept. 2, delaying the much-awaited confirmation that Greece was meeting the terms of its €110 billion ($152 billion) bailout agreed in May, 2010.

The country's struggle to keep a lid on its spending and raise enough revenue has also increased uncertainty about a second €109 billion aid package agreed in July, when it became clear that the first batch of money would not be enough.

Fears that Greece might not get more rescue money and default have made Greek bond prices plummet, weighed on the euro's exchange rate with the dollar and roiled stock markets.

Austria's Finance Minister Maria Fekter, traditionally a hard-liner when it comes to sticking to the bailout conditions, said she was "very optimistic that the next tranche can be paid out to Greece."

She warned against a Greek default, which she said would be "very costly." Yet she did not rule it out as a possibility in the future.

"Should a situation arise, where this way (of providing rescue loans) suddenly becomes more expensive than the alternative, we will have to think about the alternative," Fekter said. "But at the moment this is not yet the case."

Friday's announcement fell short of a complete assurance Greece will get the money and hopes for tangible progress on another obstacle were quickly thwarted, when Finnish Finance Minister Jutta Urpilainen said there was still no solution to her country's demand for guarantees to back its contribution to the second rescue package.

The small Nordic country's demand has triggered similar requests from several other states, including Austria and the Netherlands.