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Eurozone ministers OK $10.7 billion Greek loan

By Greg Keller

Associated Press

Published: Tuesday, Nov. 29 2011 1:40 p.m. MST

Italian Prime Minister and Finance Minister Mario Monti, left, speaks with Dutch Finance Minister Jan Kees De Jager during a round table meeting of the eurogroup at the EU Council building in Brussels on Tuesday, Nov. 29, 2011. The 17 finance ministers of countries that use the euro converged on EU headquarters Tuesday in a desperate bid to save their currency and to protect Europe, the United States, Asia and the rest of the global economy from a debt-induced financial tsunami.

Virginia Mayo, Associated Press

BRUSSELS — Eurozone ministers threw a lifeline to Greece on Tuesday as they scrambled to prevent financial chaos from spreading further and driving Europe's common euro currency into a catastrophic breakup.

The monthly meeting of 17 nations was dominated by attempts to keep Greece afloat and find enough money to coat a veneer of credibility over Europe's rescue fund. It came on the third straight day that Italy has taken a beating in the bond markets, with investors growing increasingly wary of the country's chances of avoiding default.

Markets rose for the second day Tuesday on hopes that the enormous pressures on the ministers would produce some results.

The finance ministers approved the next installment of the Greece's bailout loan — €8 billion ($10.7 billion). Without that money, Greece would have run out of cash before Christmas, unable to pay employees or provide services. Two officials in Brussels reported the development, speaking on condition of anonymity while the meeting was still going on.

The installment is part of a €110 billion ($150 billion) bailout from eurozone nations and the International Monetary Fund that Greece has been dependent on since May 2010. The new cash came after the EU demanded, and received, letters from top Greek political leaders pledging their support for tough new austerity measures.

On the bond markets, Italy's borrowing rates shot up above 7 percent, an unsustainable level in the long term and a shocking increase over rates just last month.

At the meeting, the finance ministers were discussing ideas that until recently would have been taboo: countries ceding additional budgetary sovereignty to a central authority — EU headquarters in Brussels.

Strengthening financial governance is being touted as one way the eurozone can escape its debt crisis, which has already forced Greece, Ireland and Portugal into international bailouts and is threatening to engulf Italy, the eurozone's third-largest economy.

Italy is too big for Europe to rescue. If it were to default on its €1.9 trillion ($2.5 trillion) debt, the fallout could break up the currency used by 322 million people and send shock waves throughout the global economy.

Aside from the money for Greece, some ministers acknowledged Tuesday they probably wouldn't reach their more important goal of increasing the leverage power of the European Financial Stability Facility. The fund, which is supposed to be a firewall against financial contagion swallowing up nation after nation, needs to be expanded from €440 billion ($587 billion) to something like €1 trillion ($1.3 trillion).

"It will be very difficult to reach something in the region of a trillion," said Dutch Finance Minister Jan Kees de Jager. "Maybe half of that."

And the task of agreeing on grand changes that might save the eurozone from splitting up will likely fall to the European presidents and prime ministers attending a Dec. 9 summit in Brussels.

German Chancellor Angela Merkel reiterated her support for changes to Europe's current treaties in order to create a fiscal union with stronger binding commitments by all euro countries.

"Our priority is to have the whole of the eurozone to be placed on a stronger treaty basis," Merkel said Tuesday. "This is what we have devoted all of our efforts to; this is what I'm concentrating on in all of the talks with my counterparts."

Merkel acknowledged that changing the treaties — usually a lengthy procedure — won't be easy because not all of the European Union's 27 nations "are enthusiastic about it." But she dismissed reports that the eurozone, or smaller groups of nations, might go ahead with their own swifter treaty.

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