Europe to clear Greek debt funding

Moving to save Greece from default, eurozone governments agreed in principle Friday to unlock the funds and brought forward a meeting in Brussels due Sunday to a teleconference Saturday that will make the deal official, diplomats said.

The conference call will sign-off on a fifth tranche of aid worth 12 billion euros from last year's 110-billion-euro ($160 billion) bailout for Greece by the European Union and the International Monetary Fund, diplomats said.

Athens, which urgently needs the cash this month to pay bills coming due, welcomed the "positive" decision by the eurozone to accelerate the disbursement of the next batch of loans.

Although the ministers are not expected to complete talks on a second overall bailout of similar size requested by Greece, their plan to involve the private sector won the backing of a key global finance group on Friday.

The Institute of International Finance, which groups banks, insurers and investment funds, said it was "ready to engage in a voluntary, cooperative, transparent and broad-based effort to support Greece given its unique and exceptional circumstances."

Negotiations for the second rescue are proving tricky because some governments, especially Germany, want private investors to share the pain by agreeing to a voluntary rollover of Greek debt. Under the scheme they would buy new bonds to replace those maturing soon, meaning they shoulder some of the burden along with the taxpayer.

A European diplomat said a decision on the size of the new bailout, and the participation of private investors, could come at another meeting in Brussels on July 11.

France, whose banks hold a sizeable proportion of Greek debt, has proposed, among other measures, that lenders could roll over their loans into new 30-year bonds, giving Greece more time to put its financial house in order.

German banks made a gesture Thursday by agreeing to extend the maturities of around 3.2 billion euros ($4.6 billion) in Greek bonds due to expire between now and 2014.

Josef Ackermann, chief executive of Deutsche Bank, warned however that the negotiations were "extremely complex."

The moves to provide Greece with more funding come after the parliament met demands from foreign lenders this week to pass tough budget cuts, tax hikes and a sale of state assets despite rioting in the streets of Athens.

The crisis has already claimed Ireland and Portugal as other eurozone nations scramble to slash public deficits and debts to avoid contagion from Greece.

"The sovereign debt crisis is far from over since there are many potential triggers for further turbulence," Germany's Commerzbank said in a note to clients.

Weaker eurozone nations are "groaning under the weight" of austerity measures and the collapse of a property bubble, it said.

While a slow recovery is likely in Italy, Spain and Ireland, the prospects "remain very gloomy" for Portugal and Greece.

Ben May, European economist at Capital Economics, said Greece has avoided a "near-term disaster" by passing the budget cuts but the country "remains in precarious position."