Banks move closer to deal on Greek bailout

Banks and policymakers moved closer to a deal on Friday to help Athens secure funds ahead of a parliamentary vote on austerity next week that Greek Prime Minister George Papandreou must win to avert default. Despite a refusal by the conservative opposition to back the plan agreed with international lenders and signs of revolt in his own socialist party, Papandreou said he was confident the deeply unpopular package of spending cuts, tax hikes and privatisations would pass.
"It is a moment of historic importance. If everybody resists, worse things will come, perhaps even bankruptcy," Papandreou told a news conference at the sidelines of a summit of European Union leaders in Brussels. The meeting saw euro zone governments discuss a new bailout package for Greece, which could include up to 30 billion euros from the private sector to help cut Greece's huge public debt.
President Nicolas Sarkozy said French banks had agreed to participate in a voluntary rollover of Greek debt, Spain's Jose Luis Rodriguez Zapatero said Spanish banks were willing to take part in a scheme to buy Athens more time while Berlin has asked German banks to state their intentions next week. "We have had many meetings with the banks and insurance companies. There is no difficulty," French President Nicolas Sarkozy told reporters after the meeting.
However, no new money will flow unless the Greek government enacts deep cuts and markets remain sceptical. The euro fell sharply on doubts the government will win the day after a maverick ruling party member said he would vote against. After a difficult series of meetings this week, new Greek Finance Minister Evangelos Venizelos thrashed out an agreement with inspectors from the EU and the International Monetary Fund on Thursday to release the funds Greece needs immediately.
But if the vote next week is lost, international lenders are unlikely to release a 12 billion euros funding tranche, meaning the government will run out of cash within days. Greece accepted a package of 110 billion euros of EU/IMF loans in May 2010 but now needs a second bailout of a similar size to meet its financial obligations until the end of 2014, when it hopes to return to capital markets for funding.
International lenders want binding commitments that Athens will push through the painful measures judged necessary to get its shattered public finances back in order. The government won a vote of confidence this week with 155 out of 300 votes in parliament, showing how tight the June 29 vote on its austerity package could be.
In a sign of the uncertainty around the vote, which will be accompanied by a two-day general strike, one deputy from the ruling PASOK party said he will oppose the mix of higher taxes, spending cuts and state selloffs. "Shops are shutting down every day and we are taking anti-growth measures," party maverick Thomas Robopoulos, a car dealer from Greece's second city, Thessaloniki, and one of the few businessmen in parliament told Reuters. "I will take the floor in parliament and try to convince them to do something."
Daily protests continue in Athens and other cities and an opinion poll on Friday put Greece's conservative opposition 2.1 points ahead of PASOK and showed three quarters of Greeks oppose the raft of tax hikes and spending cuts that will hit them hard. Greece's partners have expressed growing impatience with what they see as a refusal to face the seriousness of the situation.
The attitude of the conservative opposition, which has said it will oppose parts of the package, has particularly enraged European leaders. "I made it very clear that for the acceptance and for the stability of Greece, it would be highly desirable for the opposition to vote for this package," German Chancellor Angela Merkel said in Brussels.