Europe wrangles over new Greece bailout

[June 14, 2011]  BRUSSELS (AP) -- Europe's top financial officials are set to discuss the contribution of banks and investment funds to a new aid package for Greece in a meeting later Tuesday.

Greece, which was already granted a euro110 billion bailout last May, needs tens of billion of euros in additional financing over the coming years as it remains locked out of international debt markets.

The meeting of finance ministers in Brussels plots Germany, supported by several other rich nations, against the European Central Bank.

Germany wants banks and other private investors to give Greece more time to repay the bonds they hold, but the ECB fears such a maturity extension would be counted as a default, pummel Greek banks and drag other struggling countries further into crisis.

Officials hope that Tuesday's meeting will break down some of the starkest divisions and allow European Union leaders to reach a final deal at their summit in Brussels on June 23-24.

However, Germany's Finance Minister Wolfgang Schaeuble received support Tuesday from his Dutch counterpart, who told parliament that the Netherlands will only participate in further financial support for Greece if private bondholders also agree to "contribute substantially."

In a letter ahead of the debate, Jan Kees de Jager said lending Greece money is "not an attractive prospect," but without aid the country will default immediately, with dire repercussions for the financial system.

He said Greece may eventually default anyway. So a bailout by governments alone would be unfair to taxpayers, given that bondholders have an "enormous" financial interest in Greece.

He said creditors should give Greece more time to pay back its debt, warning that "there are no easy options."

[Associated Press]

Toby Sterling contributed from Amsterdam.

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