EU may ask investors to give Greece more time

Greece's private creditors may be asked to give the struggling country more time to repay its debts, the European Union's top economic official said Tuesday, marking an important shift in the region's attitudes towards solving the crisis.

Until this week, European officials had denied that extending debt repayments had even been discussed, for fear of undermining market confidence.

But many investors are convinced a change in Greece's debt deals is inevitable at some point.

"A voluntary extension of loan maturities could ... be examined" together with asking banks and other investors to maintain their exposure to Greece, the EU's Monetary Affairs Commissioner Olli Rehn told journalists after a two-day meeting with European finance ministers.

Before any such move is considered, however, Rehn said the Greek government was expected to announce in coming days new spending cuts and reforms to make sure it can lower its budget deficit to the targets set out in its bailout programme.

At its current rate, Greece is expected to post a budget deficit of 9.5 per cent this year, more than three time's the EU's limit and two percentage points above what it promised a year ago.

To meet those targets, Greece needs to step up its €50 billion (US$71 billion) privatisation programme, selling at least €15 billion worth of national assets in companies and real-estate holdings this year and next, Rehn said.

Jean-Claude Juncker, the premier of Luxembourg who chairs the meetings of eurozone finance ministers, said Monday that privatisations will have to be made beyond what was previously planned.

The increasingly loud criticism of Greece - and a gradual admission that private creditors will have to share some of the pain of the country's financial problems - comes more than a year after it was granted €110 billion in rescue loans from other eurozone nations and the International Monetary Fund.

Eurozone finance ministers have started discussing a second bailout, as it has become clear that Greece will need more money over the next two years. However, they won't sign off on any new funds without new commitments from the country.

Greece's debt is expected to top 166 per cent of economic output by the end of 2012, way above any other eurozone state.

- AP