Europe delays decision on emergency loans to Greece

Euro zone finance ministers postponed a final decision on extending a further 12 billion euros (US$17 billion) in emergency loans to Greece, saying Athens would first have to introduce harsh austerity measures.

The ministers said in a statement that they expected to pay the money by mid-July. Greece has said it needs the loans by then to avoid defaulting on its debt.

But keeping up the pressure on Athens, the ministers insisted that disbursement would depend on the Greek parliament first passing laws on fiscal reforms and selling off state assets.

The statement, issued after a seven-hour meeting in Luxembourg that ran into the early hours of Monday morning, also committed the ministers to putting together a second bailout plan for Greece, beyond an initial 110 billion euro rescue launched in May last year.

The ministers said that in addition to more official loans, the new bailout would include a voluntary rollover by private investors of their Greek debt holdings. The statement did not say how large the new plan would be or give details of the rollover.

On Sunday, Prime Minister George Papandreou asked Greeks to support the austerity steps and avoid a "catastrophic" default. Addressing the Greek parliament, he appealed for the nation to accept deeply unpopular tax hikes, spending cuts and privatisation plans which international donors have demanded.

"The consequences of a violent bankruptcy or exit from the euro would be immediately catastrophic for households, the banks and the country's credibility," Papandreou said at the start of a confidence debate on his new crisis cabinet.