Euro bailout hangs on Athens vote of confidence

By DAN ATKINSON and SIMON WATKINS FOR THE MAIL ON SUNDAY
Updated: 17:07 EST, 18 June 2011

Vote of confidence: Greek PM George Papandreou

Greece is on a knife edge today with a parliamentary vote of confidence in its crisis-hit government imminent ahead of talks aimed at securing a second huge bailout package needed next month.

Fears of an imminent Greek default on its near- £300billion public debts spooked markets last week as comparisons were drawn with the 2008 collapse of Wall Street investment bank Lehman Brothers.

But by Friday afternoon nerves had been calmed by a joint statement from French President Nicolas Sarkozy and Germany’s Chancellor Angela Merkel that showed the eurozone’s two leading players had buried their differences over how to help Athens.

Merkel had been thought to favour forcing private creditors to share the pain of reducing Greece’s debts, which equal 150 per cent of national output.

This would have meant big losses for many banks on the Continent, although the exposure of Britain’s institutions to Greek debt is a relatively modest £9billion.

Germany has backed away from this idea, calming markets.

Meanwhile, the International Monetary Fund has indicated that it will pay its own £10.5billion contribution to Greece early next month, even if eurozone finance ministers fail to agree details of their portion of the bailout