Greece wins 11th-hour pledge of fresh aid

(LUXEMBOURG) - Drowning in debt, Greece won Friday the pledge of a new bailout on top of a July cashflow fix, but only after surrendering some of its financial autonomy.

"There is an agreement," Prime Minister George Papandreou said as Europe rallied to avoid bankruptcy in Athens and a damaging exit from the euro currency area.

The plan hinged on a positive review by the European Union and the International Monetary Fund of Greek budgetary efforts despite a worse-than-expected national recession since last year's 110-billion-euro rescue.

Anchoring the bid to to bring Athens back from the brink, with the debt load hitting some 350 billion euros ($500 billion), the next 12-billion-euro tranche of the loans agreed last year, which had been in doubt, should now be paid out early next month.

Crucially, Athens can also expect a new bailout, set to amount to some 60 billion euros, which is to be partly funded by private banks rolling over existing Greek government debt holdings due for redemption.

However, international backers want greater control over a radical economic overhaul, ranging from decisions over the privatisation of Greek state assets to fixing the country's chaotic tax collection.

As trade unionists occupied the finance ministry in Athens and threatened a general strike against more budget cuts and layoffs, Papandreou said he had asked that EU partners help manage the pain.

"These are things which I'm very glad that they are ready to help (with) and provide the necessary people, technical knowledge, expertise," Papandreou said after talks in Luxembourg with key political fixer Jean-Claude Juncker, the head of the Eurogroup of finance ministers in the shared currency area.

Papandreou said that despite "big sacrifices by the Greek people, still much has to be done. At the same time we have seen that the markets remain sceptical and this is why we are now discussing about additional financial support."

Luxembourg premier Juncker said the 17-nation eurozone was likely to agree fresh aid for the indebted nation but "under strict conditionality".

"This conditionality includes private sector involvement on a voluntary basis, and this private sector involvement will have to be negotiated with private creditors."

He added: "On that basis, it's obvious there will be not be an exit of Greece from the euro area, there will be no default and Greece will be able to fully honour its obligations."

A joint statement by the EU, the IMF and the European Central Bank said "discussions on the financing modalities for Greece's economic programme are expected to take place over the next few weeks."

In Athens, the finance ministry said the discussions foresaw a new four-year programme.

EU economic affairs commissioner Olli Rehn underlined that the EU executive and other European states could now step in.

"We remain open to explore possibilities for further and reinforced assistance should there be a need, for instance in taxation and privatisation matters," he said.

"Once again, I call on all political forces in Greece to put aside their domestic disputes and endorse the main objectives and policies of the programme, for the sake of the recovery of the country, for the sake of growth and employment."

The report from the "troika" of the commission, the ECB and the IMF overseeing Greek financial consolidation moves said Athens "has committed to an ambitious medium-term fiscal strategy that will enable it to maintain its 2011 and medium-term fiscal targets.

"This strategy includes a significant downsizing of public sector employment, restructuring or closure of public entities, and rationalisation in entitlements."

It added: "On the revenue side, the government will reduce tax exemptions, raise property taxation, and step up efforts to fight tax evasion."