• Further €65bn needed to cover maturing debt
• Market pressure eases on Greece's bonds
Greece's international creditors inched closer to giving the indebted country a second bailout on Friday as officials acknowledged that without further aid Athens would be unlikely to meet repayments on its huge borrowings.
Eurozone ministers agreed "in principle" to the rescue package during talks in Vienna, European Union sources said. The bailout, reportedly worth €65bn (£58m) to cover maturing debt over the next two years, would have to be finessed before being finally agreed when the Euro Group – the conference of finance ministers of the eurozone countries – next meets on 20 June.
The prospect of the nation securing another injection of cash, barely a year after receiving €110bn in emergency loans from the EU and IMF, assuaged market fears of default as the prime minister, George Papandreou, flew to Luxembourg to convince lenders that he would back up the extra aid with deeper austerity. Premiums on Greek bonds and the cost of insuring Greek debt fell sharply.
Papandreou, who has promised to make budget savings of €6.4bn in 2011, was expected to outline a medium-term budget plan, including a faster sell-off of public assets, to Jean-Claude Juncker, who presides over the 17-nation Euro Group.
Both the EU and International Monetary Fund have said accelerated privatisation by Athens, which hopes to raise €50bn with the sale of ailing state companies, resources and prime property assets, will be the main condition for further aid.
After weeks of negotiations with creditors, the Greek finance ministry issued a statement insisting a review of the public finances had "concluded positively", although it avoided saying whether the auditing process would release a fifth tranche of aid desperately needed to pay public sector wages and pensions. The €12bn instalment is due in June.
Papandreou has also pledged to ignore vested interests and forge ahead with structural reforms to restore the country's stagnant economy and notorious lack of competitiveness. But he faces formidable opposition from a public that has already endured wage and pension cuts, tax increases and loss of benefits.
Politicians have increasingly become the target of rage, with protesters pelting them with stones and yoghurt. Tens of thousands of demonstrators have also converged on public squares in a show of mass anger.
Militant union activists said on Friday that the new measures would "turn workers into modern slaves" and, after storming the finance ministry, hung up a huge banner that appealed for an "organised overthrow" of the austerity programme.
Greece has missed targets in its current bailout programme because of a revenue shortfall due to a deep recession and chronic tax evasion, requiring extra fiscal measures worth €6.4bn, or 2.8% of gross domestic product, this year. The Greek finance ministry said on Friday that the government would finalise new steps in the coming days, putting them to parliament after the cabinet approves them.
The new bailout programme also faces protest from some backbenchers in Papandreou's governing Pasok party. But increased funding for Greece may in turn face resistance in the parliaments of fiscally conservative northern states, especially Germany and the Netherlands.
Some European politicians and economists argue that investors who bought Greek government bonds should share that burden, perhaps by cutting the value or extending maturities.
Claudio Loser, a former director of the western hemisphere for the IMF, said the IMF should push harder for Greece to restructure its debt and negotiate so-called "haircuts", or reductions in the value of bonds, with investors.