Greece Needs Fresh Rescue by September

Greece needs a fresh tranche of international aid by Sept. 15 and is prepared to push new austerity measures and privatisations to secure the lifeline to deal with its debt crisis, its finance minister said on Tuesday.

Evangelos Venizelos said world financial markets were using Greece as an excuse for an attack on the euro and that whatever Athens did, markets would never be satisfied.

He promised that Greece would stick rigorously to its reform and revenue targets to secure continued EU/IMF funding.

"Everybody knows that Greece is not the problem. Greece is the excuse for an attack on the euro," Venizelos told a news conference on his return from a Eurogroup finance ministers' meeting in Brussels.

Greece's hopes for more funding were kept alive after the socialist government passed a package of budget cuts, tax rises and privatisations to make the 230-billion-euro economy more competitive, despite political opposition and street violence.

Athens needs a second bailout package to take it through to mid-2014 as it faces a funding gap next year under its current EU/IMF rescue deal and cannot return to bond markets in 2012.

Euro zone finance ministers took no immediate action but promised cheaper loans, longer maturities and a more flexible rescue fund "shortly" to help Greece and other EU debtors and halt financial contagion.

They also acknowledged for the first time that some form of default may be needed to cut Greece's huge debt burden and secure economic recovery.

Venizelos said Greeks should unite behind the austerity plan to secure a stronger bargaining position with creditors.

"The invitation to the political opposition to negotiate together the new programme and its details is still valid. Any consensus in Greece, even the smallest, strengthens our position abroad," he said.

The opposition conservatives who voted against the bailout have been deeply critical of the economic adjustment plan that Athens agreed with the EU and the IMF, saying the policy mix is wrong, taxing the economy into a tail spin.

Doubts over the government's pledges to raise 50 billion euros ($71.52 billion) from privatisations by the end of 2015 to pay down debt were fuelled late on Monday when deputy finance minister Pantelis Oikonomou predicted it would be tough to sell all the assets slated for privatisation.


Oikonomou told lawmakers that investors were more interested in financial instruments than in buying companies. "I predict, and you will see that I'll be right, that not everything earmarked for privatisation will be sold, but much less. This is not possible (to sell everything)," Oikonomou said.

But Venizelos brushed aside his deputy's reservations at the news conference, saying the target would be met.

Athens managed to borrow 1.62 billion euros mostly from Greek investors via T-bills on Tuesday at a slightly lower yield compared to a June auction to roll over maturing short-term debt despite rising market tension over the debt crisis which is staring to affect Spain and Italy.

Fewer foreign investors participated in the sale than a month ago.

Prime Minister George Papandreou told a cabinet meeting on Tuesday that the EU was coming around belatedly to his view that the debt crisis was a broader problem.

"From the beginning we have said a comprehensive European solution is needed. The debt crisis is the result of our own serious mistakes and chronic weakness but at the same time it is a crisis that concerns the euro," he said.

"We proposed solutions such as eurobonds, we fought and continue to fight for these."

In a withering open letter to Jean-Claude Juncker, the chairman of the Eurogroup, Papandreou said earlier European partners had acted too slowly to stem the crisis while creating a "cacophony" that had ultimately put domestic politics before the common currency.