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Eurozone closer to cutting Greece's huge debts

BRUSSELS — Finance ministers from the 17 euro countries agreed Friday to pay Greece its next batch of bailout loans, avoiding a potentially disastrous default, and moved closer to reducing the country's massive debt burden.

But Greece's debts are only one piece of Europe's economic puzzle. The ministers meeting in Brussels were also struggling with two more complicated issues: boosting the eurozone's $607 billion bailout fund to keep the crisis from spreading and forcing weak banks to increase their capital buffers as a defense against market turmoil.

Ministers had made progress on strengthening the banks, and that a plan should be ready for a summit of EU leaders Sunday, the Associated Press reported, citing an unnamed European Union official. He spoke on condition of anonymity to discuss confidential negotiations.

However, more work remained to be done on Greece and the bailout fund, the European Financial Stability Facility. Decisions on those two fronts were not expected until a second summit on Wednesday.

Greek Finance Minister Evangelos Venizelos welcomed the news that Athens would get the next $11 billion installment, calling it a "positive step." A day earlier, Greek lawmakers had approved new, deeply contentious austerity measures to get the money.

The loans, which still need the approval of the International Monetary Fund, should be delivered during the first half of November. The money will keep Greece afloat for a little longer, but most economists agree that the country also needs a substantial cut to its debt load.

The findings of a report from Greece's international debt inspectors piled more pressure on European finance chiefs to find a solution for the country, whose troubles kicked off the crisis almost two years ago.

According to the report, Athens won't be able to raise money on financial markets until 2021 unless it is allowed to write off more of its debt load. If that doesn't happen, the country would need hundreds of billions of euros in new bailout loans.

Germany is pushing for a deal to have Greece's private creditors take bigger losses of 50 percent to 60 percent and reduce its debt to some 120 percent of GDP by 2020.

The EU official said ministers had moved closer to Germany's position on steeper cuts to Greece's debt, but some financially weaker countries were still worried that could destabilize their markets and push their borrowing rates higher.

The eurozone needs to find a way to ensure that larger countries like Spain and Italy don't get engulfed in the crisis, as they would be harder to bail out.

Eurozone closer to cutting Greece's huge debts 10/21/11 [Last modified: Friday, October 21, 2011 9:42pm]
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