Euro Meeting Disappoints, Greek Bailout in Flux

Yesterday’s meeting of euro zone finance ministers ended with little progress regarding next steps in dealing with the sovereign debt crisis in Greece.

According to a Reuters report, “Euro zone finance ministers are reviewing the size of the private sector’s involvement in a second international bailout package for Greece, a move that could undermine the aid program and hasten the threat of a Greek default.”

The story went on to say that the finance ministers agreed that Greece could wait until mid-November to receive its next tranche of bailout funds from the European Financial Stability Fund (EFSF), which will put “more pressure on Athens to tackle its debt problems.”

Jean-Claude Juncker, the chairman of the Eurogroup ministers, told reporters after the meeting that “As far as the PSI (private sector involvement) is concerned, we have to take into account the fact that we have experienced changes since the decisions we took on the July 21, so we are considering technical revisions, so yes.”

Although Juncker did not provide specifics on what a new agreement could look like, speculation has developed that the 21% haircut on Greek debt agreed to in July will be insufficient given the fact that Greece’s economy has deteriorated further in recent months.

European financial markets added to their recent losses on Tuesday following the meetings, as investors viewed the developments as the latest item of uncertainty in an ever-growing list of headwinds for the euro zone.

The next meeting of euro zone finance ministers – originally scheduled for October 13 – has been canceled so that inspectors from the European Union (EU)  and International Monetary Fund (IMF) will now have until November to asses the impact of Greek austerity measures on the nation’s budget deficit before deciding on the eventual sovereign debt haircut.