Decision on new Greek bailout funds delayed until October
By Michael Birnbaum,
BERLIN – The European Union will not decide whether to give Greece a new installment of bailout money until October, officials said Friday, lengthening the uncertainty about whether the troubled country will default on its debts.
Investors had hoped for a quicker sense about the direction of the bailout. Greece’s financial troubles are threatening to spark a wave of credit problems for banks and countries around the euro zone, drawing an unusual visit from U.S. Treasury Secretary Timothy F. Geithner to a meeting of European finance ministers in Poland Friday and Saturday.
Geithner’s attendance at the meeting is a sign of American worry about the potential for the European problems to set off another recession.
Geithner chided European officials over “loose talk about dismantling the institutions of the euro,” saying that “governments and central banks have to take out the catastrophic risks from markets,” Reuters reported.
On Thursday, the Federal Reserve decided to open its vault to other central banks in an attempt to avoid a credit freeze, in which banks are too afraid of each other’s balance books to loan each other the cash that helps lubricate the daily transactions of financial markets.
Markets continued to be buoyed Friday by the news, with Asian markets closing higher and most European markets up slightly in trading. But U.S. stock futures were lower ahead of the market’s open.
A bitter debate has emerged about whether the European Central Bank should support troubled countries by buying their bonds, which is outside its core mandate of fighting inflation.
Portions of German Chancellor Angela Merkel’s fractious coalition have suggested that Greece may default, worrying investors.
Hopes for quick answers about the fate of $11 billion in aid for Greece were dashed even before Friday’s meeting started, when Finnish finance minister Jutta Urpilainen said she anticipated protracted discussions over her country’s demand for Greek collateral before it draws on another series of bailout loans.
After Finland made its demand for the guarantees, other countries also asked for similar assurances, which could diminish the amount of money actually available for Greece.
Urpilainen has said she expects that the euro-area countries will find a solution that is acceptable to them all.
If Greece does not receive the extra $11 billion in aid at the end of the month, it will run out of money by mid-October.
Geithner was expected to push his European counterparts to leverage their bailout funds to increase the amount of money available for loans to troubled countries.
In mid-day trading, Germany’s DAX was up 1.10 percent, to 5568.97, and the British FTSE 100 was up 0.58 percent, to 5368.70. France’s CAC 40 was up 0.64 percent to 3064.96.Japan’s Nikkei 225 closed up 2.25 percent, to 8864.16, while Hong Kong’s Hang Seng closed up 1.43 percent, to 19455.31.