Greek debt crisis: eurozone ministers meet amid deepening gloom - The Guardian

Europe's single currency governments are expected to throw Greece a summer lifeline, agreeing to disburse €12bn by next month to keep the debt-stricken country from going broke and triggering an international crisis.

But the meeting in Luxembourg of finance ministers from the 17 eurozone countries also faced the much bigger challenge of trying to structure a new three-year bailout for Greece in a way that would persuade European banks, pension funds and other private creditors to roll over the country's ballooning debt.

The Eurogroup meeting took place amid a mood of growing futility over Greece and pessimism over the fate of the euro.

"We wouldn't be able to control an insolvency," warned the German chancellor, Angela Merkel. "We all lived through Lehman Brothers. I don't want another such threat to emanate from Europe."

Jean-Claude Juncker, the Luxembourg prime minister who heads the Eurogroup, said that Italy and Belgium, rather than Spain, could be at risk if the new bailout being negotiated for Greece involved losses for creditors and the financial markets then declared Greece to be in default.

On Friday in Berlin, Merkel admitted defeat in a fight with the European Central Bank, dropping German insistence that the international banks should take part in the proposed bailout by swapping existing bonds for new paper with a seven-year maturity, giving Greece time to try to recover.

At the weekend she reiterated that private creditor involvement should be "substantial", but admitted there was no way of ensuring this.

Germany is the biggest player in bailing out Greece, but the commitment of taxpayers' money is deeply unpopular. Merkel's volte-face on Friday earned her biting criticism in the weekend media.

After a year in which Greece has already received €53bn in bailout funds, only to see the crisis worsen, doubts are growing over whether the embattled Greek government will be able to deliver the savage spending cuts being demanded as the price of rescue.

Amid a sense of deepening panic and gloom, leading European industrialists are to take out full-page adverts in the French and German press on Tuesday pleading for intervention to save the euro. "A return to a stable financial situation will cost many billions of euros, but the European Union and our common currency are worth every effort," says the advert.

Top German economists lined up at the weekend to accuse Merkel and other EU leaders of "political failure". The Greek government was also a target.

"It is disappointing that the Greeks are not grateful for the help from Germany and the EU," Hans-Werner Sinn, head of Munich's IFO Institute, told the Frankfurter Allgemeine newspaper.

The cover story in Monday's edition of the influential Hamburg weekly Der Spiegel, is "an obituary for the common currency."

Britain, meanwhile, stressed that it wanted no part of any new Greek rescue, except through its participation in the International Monetary Fund.

"It's the eurozone that is taking forward discussions now about the next stage of dealing with Greece's substantial problems," the chief secretary to the Treasury, Danny Alexander, told Sky News. "There's simply no proposition on the table for the UK to contribute beyond IMF involvement and I don't expect there to be one."

That could change if the EU decides to use an emergency bailout fund administered by the European commission for the rescue. Britain is liable for a share of this and any decision would be taken by qualified majority vote, meaning the Cameron government would not be able to wield a veto.