EUROPE’S FINANCE MINISTERS have deferred a final deal guaranteeing a second bailout for debt-ridden Greece – but have signed off on the latest instalment of bailout loans for the struggling country.

The New York Times reports that the ministers signed off on a €8.7bn package of loans after a late-night conference call on Saturday, securing the country’s short-term future in the aftermath of a new batch of austerity cuts.

George Papandreou’s government had been required to push a new €28bn five-year cutbacks package through parliament before the funding would be released. The measures were passed on Wednesday.

But ministers kicked for touch on crucial decisions regarding a second bailout, thought to be worth somewhere between €80bn and €90bn, which is now not likely to be confirmed until September.

In particular, ministers were unable to decide on how much the private sector should have to contribute to the cost of a second package – in order words, on how much Greece should burn its sovereign bondholders.

Bloomberg said the short-term deal pulled Greece back from the edge of default – saying the country could have been insolvent within weeks if the next tranche of bailout funds had not been confirmed.

Negotiations

It added that the Eurozone’s finance ministers were seeking negotiations with bondholders before pressing ahead with specific plans to write off some of their investments.

This morning Standard & Poor’s further upped the ante by saying Greece would be in default if it was to ‘roll over’ – that is, immediately reissue – some of its bonds as they fall due.

That proposal has been pushed by French banks, who have joined with German counterparts in saying they would voluntary accept new bonds instead of a cash payout when their investments fall due.

“It is our view that each of the two financing options described in the [French] proposal would likely amount to a default under our criteria,” S&P said, according to Reuters.

The S&P comment came in spite of a political declaration that the French plan would not trigger a default. The ECB and Eurozone nations are keen to avoid having any Eurozone nation officially labelled as being in default.