Greece hopes for bailout deal

Greece hopes euro zone leaders on Thursday can reach a debt deal to secure its funding up to mid-2014 without triggering a selective default rating, the country's finance minister said today.

"Our aim is to avoid even a selective default," Evangelos Venizelos told the Associated Press news agency in an interview late yesterday.

"There are proposals that provide an answer to what is sought and at the same time do not permit rating agencies to issue that rating," he said.

European governments and banks are struggling to reconcile competing proposals for a second bailout for Greece, two days before leaders meet to prevent the crisis from spreading through the region.

A summit of euro zone leaders, scheduled for Thursday in Brussels, will seek to agree on a new rescue package for Greece, supplementing a €110 billion bailout launched in May last year.

"We want a solution that makes our national debt sustainable ... guarantees Greece's borrowing needs until mid-2014 when we foresee our return to markets and guarantees the liquidity of Greek banks," the minister said.

Mr Venizelos also told the agency he believes a debt deal can be reached on Thursday to prevent contagion in the area.

"Reaching a solution is attainable because this solution does not only include Greece. At issue is the euro and the resilience of the euro zone," he said.

"That is why the protection of Greece is a self-defence mechanism for the euro zone. That will help us avoid a domino effect."

Separately, Germany's Social Democrats (SPD) have offered Chancellor Angela Merkel their support to get a “Marshall Plan” for Greece through parliament amid growing nervousness in her own conservative camp.

Ahead of Thursday’s emergency summit, the offer to back substantial debt for Athens and other “unpopular” European decisions indicates that Berlin politicians are beginning to take to heart criticism of Germany’s role in the euro zone crisis.

Peer Steinbrück, finance minister in Dr Merkel’s first “grand coalition” administration, warned yesterday that “continuing to muddle through” would end up more risky and expensive than even a 50 per cent debt relief for Greece.

“It’s important that this summit agrees measures that are wide-ranging and effective,” said Mr Steinbrück, presenting a programme calling for radical restructuring of debt and investment in Greece.

The SPD’s proposal came as Dr Merkel’s spokesman insisted that the German leader would attend the summit. Last week she had resisted an emergency summit; her officials insisted late August was time enough to approve new aid for Greece.

But that timetable has evaporated amid growing market nervousness and record interest rates on Italian and Spanish sovereign debt.

The SPD offer of assistance was accompanied by an energetic attack on Dr Merkel’s “weak leadership” that has left European partners confused at a critical moment for the euro zone.

“It’s important that this summit agrees measures that are wide-ranging and effective,” said Mr Steinbrück. “I can understand that it makes no sense to call a summit when one doesn’t know what decisions there will be but that is where one has to work towards there being decisions.” The SPD’s radical proposal, if accepted, would mark a quasi-return to the grand coalition of Dr Merkel’s first term.

On the one hand it would silence the bailout critics in Dr Merkel’s coalition partners. But relying on opposition support to get EU measures through parliament would be a sign that Dr Merkel no longer has her own political camp behind her.

Irish officials said they were hopeful of progress, if not a breakthrough, at the summit on Ireland’s loan interest rate. “What is encouraging is the fact that the agenda is focused on solving a European crisis; rather than proceeding on a country by country basis, which has not worked,” said a spokesman for Taoiseach Enda Kenny.

Speaking in Brussels, Tánaiste Eamon Gilmore said agreement at Thursday’s summit was vital to calm financial markets and break the “linking” between Ireland and other bailout recipients such as Greece.

Additional reporting: Reuters