Eurozone starts talks on breakdown of cash aid for Greece

(BRUSSELS) - Eurozone finance ministers launched formal talks on Wednesday by telephone over the financial "modalities" of a new Greek rescue package which an EU diplomat said will top 90 billion euros.

The head of the ministerial Eurogroup, Luxembourg Prime Minister Jean-Claude Juncker, said the ministers "had a first exchange of views on the financing modalities for Greece's adjustment programme" during a conference call.

The talks followed the conclusion of a mission by the European Union and International Monetary Fund looking into the need for fresh financial aid, and prepared the ground for planned dinner talks among EU finance ministers on June 14 in the run-up to a June 23-24 summit of national leaders.

Juncker set the tone for the intervening days when he called in his statement for a "reinvigoration" of Greek efforts to slash spending, sell assets and improve tax collection, following the ministers' analysis of the EU-IMF bailout review.

"We acknowledged the significant progress achieved so far by the Greek authorities, in particular as regards fiscal consolidation, although a reinvigoration of fiscal and broader structural reforms remains necessary," Juncker said.

Greece received a 110-billion-euro ($160 billion) bailout last year, but with state debts having ballooned to some 350 billion euros and a deeper than expected recession lessening the impact of sharp spending cuts, the second bailout is considered unavoidable.

Juncker said the finance ministers from the other 16 eurozone states "share the view expressed by the (EU-IMF mission) troika that strict implementation will help restore fiscal sustainability, safeguard financial stability and boost competitiveness."

He welcomed the Greek government's commitment to a privatisation programme originally aimed at raising 50 billion euros by 2015, but which the diplomat said would be expected to contribute "one third" of the new bailout plan, or 30 billion.

Another third would come from eurozone and IMF loans, although it is not clear if that is on top of loans still to be paid out under bailout number one.

Crucially this time, a similar amount is also expected from the "rollover" of debt due to private creditors, the diplomat underlined, although Juncker made no reference in his statement on how the financial modalities he referred to were broken down, putting no figures to any second bailout package.

"We underlined the importance of cross-party support in Greece," Juncker added, after a leading Greek opposition politician met with senior EU leaders in Brussels.

"The adjustment of the Greek economy can only succeed when all relevant political parties subscribe to the objectives and main parameters of the programme."

In a letter sent to eurozone partners also made public on Wednesday, German Finance Minister Wolfgang Schaeuble said private banks must forego collecting Greek public debts for seven years as a condition for funneling new financial aid to Athens.

An agreement could be reached "through a bond swap leading to a prolongation of the outstanding Greek sovereign bonds by seven years."

Taxpayers in several European countries such as Austria, Finland, Germany, the Netherlands and Slovakia are firmly opposed to more aid for Greece.