Greece can get a crucial euro8 billion ($11 billion) slice of bailout money this month if the leaders of the two main parties both commit in writing to the terms of the country's two massive bailouts and the austerity measures and economic reforms that they require, eurozone finance chiefs said Monday.
That payment, which has been delayed by two months, would head off a potentially disastrous default as early as December.
Jean-Claude Juncker, the Luxembourg prime minister who also chairs the eurozone finance ministers meetings, said that ministers at their get-together in Brussels asked for a letter co-signed by the two party leaders that they will implement that program.
Such cross-party commitment is important as Greece gears up for new elections early next year.
"It is essential that the entire political class is now restoring the confidence that had been lost into the Greek commitment to the EU/IMF program and to the agreement of the 27th of October," said European Union Monetary Affairs Commissioner Olli Rehn. He was referring to an agreement drawn up at a summit of European leaders last month in cooperation with the International Monetary Fund.
While finance ministers were meeting in Brussels, Greek Prime Minister George Papandreou and opposition party leader Antonis Samaras were trying to form a unity government that would lead the country in the meantime.
"It should have been done months ago," Juncker said of the cross-party government.
Italy, which has seen the interest rates on its bonds rise to a euro era record of 6.67 percent, also came in for scrutiny at the meeting Monday in Brussels. Italian Finance Minister Giulio Tremonti assured his colleagues that his country would implement the financial reforms promised last month in a letter from Prime Minister Silvio Berlusconi, including balancing the budget by 2013 as well as reforming pensions and deregulating the labor market.
Rehn said it was crucial for Italy to implement the policies outlined in Berlusconi's letter. He said he had sent a letter to Italian authorities asking specific questions about the implementation of the program and he expected a written reply by the end of this week. He did not say what the questions were.
Rehn said a technical mission would be sent to Rome on Tuesday or Wednesday to intensify surveillance of the country's fiscal policies.
The finance ministers also spelled out technical details of their plan to give their bailout fund more leverage. The eurozone wants to increase the firepower of the euro440 billion European Financial Stability Facility to euro1 trillion by allowing it to insure bond issues from shaky countries like Italy and Spain and by seeking investors from outside the eurozone.
The CEO of the EFSF, Klaus Regling, said the eurozone would create one or more co-investment funds that could take on funding from private investors like big banks and pension funds, non-European countries, or from the International Monetary Fund.
Investors in those fund would also receive some insurance against potential losses. Regling did not provide a figure for how much of potential losses would be insured but said the percentage would depend on each specific country.
What will follow now will be difficult talks with potential investors and rating agencies to determine how the money can be raised.
The waning confidence in the eurozone was made obvious by much lower demand for bonds issued by the EFSF Monday to raise euro3 billion for the bailout of Ireland.
The EFSF said it received orders just a little over the euro3 billion offered, at an interest rate of 3.59 percent. At the EFSF's first bond issuance for Ireland in January, the fund could have sold nine times as many bonds as it was offering.
Regling said that the 3.59 percent was the highest interest rate the EFSF has had to accept so far, a development he blamed on the worsened situation financial markets and lack of detail on how the fund will be given more leverage. He said he hoped Monday's announcements would restore some confidence.