Greece

Greece will get its next quarterly installment of bailout money only if the country's Parliament passes a contentious package of budget measures, European finance ministers said after a two-day meeting in Luxembourg, The Wall Street Journal reported. They also made long-planned changes to the euro zone's bailout funds. The ministers deferred any final decision on the installment payment until early July, after the vote in Parliament, and showed modest signs of progress toward a broader agreement for a bigger package of aid to Greece for coming years.

Not for the first time during the slow-motion car crash that is the euro zone's fiscal crisis, policy makers are tying themselves in knots in an effort to minimize collateral damage, The Wall Street Journal Agenda blog reported. They fret over whether ratings agencies and other self-appointed market regulators will define investors' participation in a new Greek funding package as a default.

The Cameron government's deep reluctance to commit UK taxpayers' money to preventing a European insolvency is being tested by German insistence that all of the EU has to come to the rescue of Greece, The Guardian reported. With European governments embroiled in a fierce dispute over how to structure a second bailout of Greece to forestall the first sovereign default in the 17-country single currency zone, Britain is keen to remain on the sidelines, insisting that Greece is purely a eurozone problem.

The European Central Bank said the threat of the Greek debt crisis spilling over into the banking sector is the biggest risk to the region’s financial stability, Bloomberg reported. “Greece could have a contagion effect,” ECB Vice President Vitor Constancio said at a briefing in Frankfurt today, when presenting the bank’s semi-annual Financial Stability Review.

Euro-zone officials failed on Tuesday to narrow sharp divisions over how to encourage Greece's private creditors to help finance the nation's mounting public debt, a move that threatens to delay a decision on a new multiyear aid package for the country, The Wall Street Journal reported. The currency bloc's finance ministers, who met for hours in Brussels, said they would ensure Greece wouldn't face a cash crunch next month.

Standard & Poor’s, the credit ratings agency, lowered its grade on Greek debt to CCC in the latest sign that the market believes that Greece will be forced to default on its debt, the International Herald Tribune reported. The three-notch downgrade makes Greece’s debt the lowest-rated in the world by S.& P., a spokesman for the agency said. The downgrade comes at a particularly awkward time for Greece. The government is trying to persuade legislators to accept a fresh set of austerity measures.

Highly indebted Greece needs a "soft, voluntary restructuring" of its debt, said Jean-Claude Juncker, the head of the group of countries using the euro as a common currency, in a radio interview Saturday, The Wall Street Journal reported. Backing proposals by German Finance Minister Wolfgang Schäuble, Mr. Juncker told Inforadio Berlin Brandenburg that private lenders need to participate in a fresh aid program for Greece, but only on a voluntary basis. Also, any such move has to be made in a way that credit ratings agencies don't interpret as a credit default, he said.

European Central Bank President Jean-Claude Trichet rejected any direct ECB participation in a second bailout for Greece, escalating a clash with governments as they rush to craft a solution involving investors, Bloomberg reported. As politicians try to find a plan by June 24 that would share the cost of a new rescue with bondholders, Trichet yesterday ruled out the Frankfurt-based ECB setting an example with its own assets.

The Greek government warned dissenters in the ruling party on Wednesday against rejecting an austerity plan agreed under a new international bailout deal, after data showed the depth of the nation's economic crisis. Prime Minister George Papandreou met senior members of his socialist party to try to stem an outbreak of unrest over the social cost of the bailout before it turns into a full-scale parliamentary rebellion. Tens of thousands of Greeks are protesting regularly against waves of austerity demanded by the European Union and IMF, as well as against corruption and state mismanagement.

When it comes to Greek bonds, Europe is trying to have its cake and eat it, too, The Wall Street Journal reported. Germany and other strong euro-zone countries, trying to fashion a second bailout for Greece, want the country's private-sector creditors to bear some of the burden in exchange for granting new taxpayer money to Athens. The European Central Bank, however, backed by France, doesn't want to do anything that would cast Greece into default or trigger losses for banks that hold its government bonds.