Euro zone agrees Greek payment

Wed, May 9, 2012, 01:00

Euro zone governments kept Greece afloat today after agreeing to authorise a payment of €5.2 billion from the region's bailout fund, despite opposition from some member states following the Greek election results.

After a conference call, the board of the European Financial Stability Facility, the €700 billion bailout fund administered by the 17 countries that use the euro, agreed to make the scheduled payment, which will allow Greece to meet near-term bond redemptions and other obligations.

European bond and currency markets were on edge in late trading today out of concern the board could decide to withhold the payment because of frustration over the anti-EU/IMF bailout sentiment prevailing among Greek political parties.

"They will get the money," one official who was on the conference call said after it ended.

Another confirmed that the payment would go ahead.

If Greece were not to get the money, it would face financing problems because of a lack of cash for salaries as well as money for the redemption of €435 million of a bond maturing on May 15th, a bond that was not fully swapped into new paper under the Greek debt restructuring deal finalised last month.

European leaders are struggling to decide how to respond to Greece following Sunday's election, in which no party secured a clear majority and fringe anti-bailout parties made substantial gains, raising questions about Greece's long-term ability to stick to the programme agreed with the EU and IMF.

Senior officials, including Germany's Joerg Asmussen, a member of the European Central Bank executive board, have cautioned Greece that it cannot expect to renegotiate the terms of the bailout and remain in the euro zone.

While opinion polls show the vast majority of Greeks want to retain the euro, most also want to renegotiate the bailout package or scrap it altogether.

Reuters