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Greece in deal with EU/IMF on austerity plan

business Updated: Jun 24, 2011 21:14 IST

European Union leaders promised more money to help Greece stave off looming bankruptcy, provided its parliament enacts an austerity plan finalised in fraught last-minute talks with international lenders.

Greek Prime Minister George Papandreou promised to push through radical economic reform after his new finance minister clinched agreement with EU and IMF inspectors on extra tax rises and spending cuts to plug a €3.8 billion funding gap.

“A comprehensive reform package... and adoption by the Greek parliament of the key laws on the fiscal strategy and privatisation must be finalised as a matter of urgency in the coming days,” EU leaders said in a statement.

“This will provide the basis for setting up the main parameters of a new programme jointly supported by its euro area partners and the IMF and allow disbursement in time to meet Greece’s financing needs in July,” it said.

The euro rebounded against the dollar and US stocks pared losses on news of the agreement in Athens.

Greece needs €12 billion in European and IMF aid to avoid a default on its debt mountain in mid-July that could spread contagion across the euro currency area and send shock waves around the world economy.

“Greece is committed, strongly committed, to continue a very important programme for major changes, to make our economy viable,” Papandreou said.

Euro zone governments are meanwhile talking to banks and insurance companies to convince them voluntarily to maintain their exposure to Greek debt when their bonds mature, as part of a second rescue package for Athens.