Euro Zone Urges Greek Parties to Commit to Bailout Terms

BRUSSELS — Greece’s two main political parties have been told they must co-sign a letter pledging support for the country’s bailout terms in order to secure an 8 billion euro loan needed to stave off default, the head of the 17 euro zone finance ministers, Jean-Claude Juncker, said late Monday.Though the ministers said they welcomed the deal to form a coalition government in Greece, European officials insisted that political consensus over a tough austerity program was a precondition for payment of the loan. Mr. Juncker said the ministers had “underlined the importance of sustained cross-party support for the program in Greece.”

“We have been calling for a coalition of national unity,” added Olli Rehn, the European commissioner for economic and monetary affairs. “It is essential that the new government will express a clear commitment on paper, in writing.”

He added, however, that provided the assurances were forthcoming, the loan to Greece could be disbursed this month. That could be done by teleconference and without a formal meeting of finance ministers, he said.

The meeting on Monday in Brussels was dominated by the political dramas unfolding in Greece and Italy. Mr. Juncker urged the authorities in Rome to begin the economic reform measures pledged by Prime Minister Silvio Berlusconi in a letter to European Union leaders last month. “What we are expecting from Italy is that Italy will be implementing all the measures which have been announced in Silvio Berlusconi’s letter,” Mr. Juncker told reporters.

The ministers also discussed a seven-page document outlining technical options for quickly expanding the firepower of their bailout fund, including one option that would hope to raise investment from outside Europe. The Dutch finance minister, Jan Kees de Jager, said the discussions remained a “work in progress.”

Officials are struggling to resolve technical details over how the 440 billion euro rescue fund could be leveraged to 1 trillion euros. The document did not refer to the difficulties European leaders have faced in persuading emerging countries to support their plans.

Under one model, the euro zone’s bailout fund would offer first loss insurance to buyers of some new issues of sovereign bonds. The other would set up “co-investment funds,” which would purchase bonds on the primary or secondary markets after attracting external investment.

But fears are growing that, even if achieved, 1 trillion euros will be insufficient if Italy fails to restore confidence in its economic management and cannot reduce its soaring borrowing costs.

The loss of market confidence in the euro zone was demonstrated Monday when its bailout fund, the European Financial Stability Facility, raised 3 billion euros via 10-year bonds to help finance its rescue of Ireland. The yield to be paid to investors was 3.591 percent, much higher than the 2.825 percent for five-year bonds issued in June.

“The yield was the highest we have had so far,” said Klaus Regling, the head of the bailout fund. “In light of the difficult market conditions, it is understandable that yields have gone up.”