Greece has enough money to pay all bondholders as well as pensions and salaries until mid-November, Finance Minister Evangelos Venizelos said today, amid market fears that the country might default in coming weeks.
Greece had previously said it would start running out of money in mid-October if it didn't get the next €8 billion installment of its €110 billion bailout package.
"Until mid-November it is clear there will be no problem," said Venizelos on his return from a euro zone finance ministers' meeting in Luxembourg.
The ministers indicated early today that Greece will get the installment, but that the decision would be made later this month.
International debt inspectors delayed their clearance of the bail-out installment, which had been originally expected in September, amid talk of missed budget targets in Athens. That has raised the possibility that Greece would run out of money to pay salaries and pensions.
If it had found itself unable to pay bondholders, a messy default could have roiled financial markets across the world.
Venizelos added that Greece will issue €880m in bonds to Finland as collateral for the country's bail-out loans to Athens under a second, €109 billion bail-out deal agreed on in July.
Finland had demanded guarantees in exchange for participating in the second package. ther countries had threatened to demand similar guarantees if Finland got its way, but Venizelos said that no other euro zone states wanted the same collateral deal.
Europe demands more Greek austerity moves
Europe yesterday again put off a decision on unblocking promised loans to Greece, ordering Athens to slash government spending and sell off more state assets, but ruled out any default or euro zone exit.
Euro zone chief Jean-Claude Juncker said a rescue fund to be used for a second Greek bail-out, agreed in July but frozen with auditors now demanding a three-year rewrite of Athens spending plans, will be made more "efficient," although he refused to increase its size.
Greek Prime Minister George Papandreou, who only on Sunday announced deep cuts for 2012 in a bid to unblock promised EU and IMF funds, will now have to agree "additional measures" with international auditors "to close any remaining gaps for 2013 and 2014," Juncker said.
His comments came after seven hours of talks between euro zone finance ministers in Luxembourg yesterday.
The ministers had downplayed the chances of €8 billion in loans originally set for September being re-activated, prompting Greek Finance Minister Evengelos Venizelos to suggest Athens was being made a "scapegoat" for wider euro zone debt troubles.
In the end Venizelos was sent back to the drawing board, with a demand to secure creditors' agreement on a new massive overhaul of the rapidly shrinking Greek economy, to enable a "definite and final decision" on the loan funding before the end of October.
Therefore no decision is expected before an EU summit on October 17-18 which had been expected to endorse the plans.
Global pressure is now on to resolve the problems before G20 leaders meet in Cannes, France, on November 3-4, after a warm-up gathering of finance ministers in Paris on October 14-15.
There was also bad news for Greece's private sector creditors whom Juncker warned to expect greater losses on their Greek sovereign debt returns than the 21 percent haircut already agreed in July.
"As far as PSI (private sector involvement) is concerned, we have to take into account that we have experienced changes since the decision we have taken on July 21," he said.
Juncker said Athens does not now need the money which it previously said was required swiftly to avert a default that would send shivers up the spines of banks, governments needing to recapitalise their financial sectors and overseas economic rivals.
When Greek lawmakers last voted through a financial overhaul in the summer, central Athens ground to a standstill as protests degenerated into sometimes violent clashes with riot police firing tear gas. The Greek parliament is set to vote on the changes at the start of November.
Two of the litany of hold-ups to the resumption of Greek bail-out transfers were removed, Juncker said. These were: Slovakia dragging its heels in ratifying changes to the euro zone's rescue fund; and fall-out over a deal Finland struck directly with Athens to obtain cash collateral before handing over its share of loans.
Asked after talks with the Slovakian prime minister if he was confident Bratislava would not torpedo the vote, Juncker gave an emphatic "yes."
Only Malta and the Netherlands have still to rubber stamp a deal struck in July, though there appear to be no particular sticking points for those nations.
Klaus Regling, the head of the European Financial Stability Facility, will explore further ideas on how to ramp up the effectiveness of the €440 billion rescue fund, after broad discussions about possible "leveraging," to multiply its firepower.
Greece's admission that it would not meet its fiscal deficit target this year had cast a shadow over the talks, hit markets further and raised fresh doubt on the planned €160 billion EU-IMF bail-out,the second multi-billion loan deal given to Athens.
Some governments are worrying about how much they will have to give their banks in the event of a Greek default.
But Venizelos bristled at taking all of the blame for mistakes coming home to roost for euro zone banks. "Greece is not the scapegoat of the euro area," he underlined, citing a cumulative recession over three years that has seen its economy shed 12% of its value.
The Greek economy is expected to shrink 2.5% this year, as the debt pile rises well above €350 billion. The US and other major economies want money to keep flowing into Athens, to avoid a default they fear could trigger global recession.
Euro slumps on Greek crisis
The euro struck a 10-year low versus the safe-haven yen on rising fears that Greece's debt crisis may trigger a fresh banking disaster. The euro also slumped to $1.3146 earlier this morning- the lowest level since mid-January. It later stood at $1.3288 this evening.
The single currency slipped to 100.76 yen earlier today - the lowest level since 2001. It recovered a little to stand at 102.18 this evening, while it was also worth 86.28 pence sterling.
Noonan denies trust issue in Greece
Michael Noonan has denied that EU Finance Ministers no longer trusted Greek politicians to deliver. Mr Noonan said the decision to postpone a decision on giving the government in Athens more money simply was simply as a result of EU and IMF inspectors having yet to complete their work and furnish a report.
On Finland's demand for collateral from Athens before participating in the next Greek bail-out, Mr Noonan said it had been agreed, other countries would be allowed to secure the same terms, however there appeared to be no other country interested in doing so.
The Minister said he did not raise the question of the new EU bail-out fund - the EFSF - being used to assist Anglo Irish Bank. He said that this issue was being dealt with in bilateral meetings.
He added that he felt the permanent bail-out fund, the ESM, appeared to be a flexible instrument. He said while it was unclear how far its boundaries will be pushed out, conversations today and yesterday suggested it would be a flexible instrument.
