Greece Must Reform To Get 12 Bln Eur Bailout

LIMASSOL - Greece's parliament must pass "key laws on fiscal strategy and privatisation" with the aim of collecting 50 billion euros by 2015 before it can receive 12 billion euros in the latest tranche of a bailout loan from the IMF and EU in mid-July, said Eurogroup finance ministers in Luxembourg.

The statement comes before tomorrow's critical vote of confidence for Greek prime minister George Papandreou's government in the Hellenic parliament. Without the vote of confidence and approval of new austerity measures the government may not receive the money, in which case Greece will default on its sovereign debt and be unable to pay public employees, according to Papandreou.

And Greece is "unlikely to regain private market access by early 2012" because of its financial crisis, said ministers.

Although finance ministers said they are conscious of the "serious challenges" faced by Greek citizens, they will not release the 12 billion euros until structural reforms are passed.

The 12 billion euros will come from official and private investors, and finance ministers would "welcome the pursuit of voluntary private sector involvement in the form of informal and voluntary roll-overs of existing Greek debt at maturity."

Voluntary rolling over Greece's debts would help the country to avoid default, said ministers.

Cyprus exposed to Greek sovereign debt

Should Greece default on its sovereign debt, the Cyprus government may be forced to bail out its banks, which own roughly 14 billion euros of Greek bonds and five billion euros worth of Greek bank bonds. Cypriots are watching the situation develop in Greece with a mixture of compassion and trepidation; compassion because their hearts are touched by the agony the Greek people are going through, and trepidation in case the economic crisis spreads to Cyprus.

Almost one-fifth of Greeks unemployed

Greece is on the point of being torn apart by tremendous economic pressures.

Popular protests are continuing into their fourth week amid strikes by public energy company employees which are causing blackouts in some areas of the country. Just over 811,000 people - or close to one-fifth of the working population - were unemployed in March. Opposition leader Antonis Samaras is extremely critical of Papandreou's government, saying that the latest agreement with the European Commission is giving too much away and exposing the economy to more problems.

Samaras has already said his party New Democracy will not vote in favour of Papandreou's government and has reiterated his call for new elections, according to Athens News Agency.

The vote of confidence for Papandreou's government will be a key turning point for Greece's economic future but recovery from the current crisis may take years, said analysts.