1 JUN 2011
By Arthur Beesley | Irish Times
EUROPEAN NEGOTIATORS have resolved to hold separate talks on the next €12 billion tranche of rescue aid for Greece from discussions on a second bailout pact for the country.
The development brings forward the likelihood of a deal this week to overcome a looming funding crunch next month while prolonging uncertainty over the country’s longer-term fiscal situation.
The prospect of a big funding gap emerging next year is now seen as inevitable in view of the country’s continued exclusion from private debt markets.
The manoeuvre to separate this issue from the country’s immediate needs means contentious questions around an expected initiative to seek a voluntary extension from creditors on the maturity on the country’s debt will not be resolved in the immediate term.
Such moves have stoked tension between euro zone countries and the European Central Bank (ECB), which says there is no distinction between the mooted “soft restructuring” of Greek debt and full-blown default.
While a senior European source said the ECB might have to “accommodate” itself to a push by EU leaders to follow through with such an initiative, credit rating agency Fitch warned yesterday that that would be akin to a Greek default.
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