- - Monday, February 13, 2012

BRUSSELS — Greece faces further hurdles and delays before it can receive a second $171 billion bailout in spite of its lawmakers voting through more austerity measures in the face of violent protests.

European Union Economic Affairs Commissioner Olli Rehn on Monday called the Greek parliament’s approval of a further round of budget cuts a “crucial step forward,” but Germany insisted it would still take some time before the second bailout is delivered.

However later Monday, the eurozone crisis and associated uncertainties prompted Moody’s to provide the first warning of a possible downgrade of Britain’s top-rated AAA credit, to hint at a second ratings agency downgrade of French debt, and to further lower the ratings of several debt-ridden eurozone members.

Germany, which as Europe’s biggest economy pays the largest part in bailout deals, said it wouldn’t give its final approval for the new Greek aid payments until early March — after it becomes clear how many banks and investment funds are willing to take losses on their Greek bonds and the parliament in Berlin votes on the new measures.

German Chancellor Angela Merkel said the successful parliamentary vote was “a very important step” toward refloating the Greek economy but stressed there “cannot be any changes” to conditions imposed by eurozone partners.

Other tough conditions imposed on Greece in exchange for the bailout range from completing a restructuring of the country’s existing debts to delivering on a promised program of privatizations. The precise terms for invasive European Union “monitoring” of Greece’s revenues and expenditure over the coming years still have to be hammered out.

Eurozone finance ministers, who are to reconvene in Brussels on Wednesday night, will want written guarantees from Greek party leaders that the latest austerity measures will be implemented even after elections.

These commitments “must be given by Wednesday,” government spokesman Pantelis Kapsis said after announcing a long-anticipated April general election.

There also remain queries of the provenance of 625 million euros in spending cuts, with an EU source suggesting Greece’s proportionately high defense spending would be a likely target.

Mr. Rehn said Greece had signaled a “determination” to end a “spiral of unsustainable public finances,” which would in return unlock “unparalleled financial assistance from Greece’s partners.”

He said this would prove “a concrete expression of their continued solidarity and genuine concern” despite “unacceptable” violence that left dozens injured and a landmark Athens cinema in smoldering ruins.

Pushing the new bailout back for several weeks underlines the amount of distrust that has built up against Greece over the past two years, when many promised cuts and reforms were passed in its Parliament but never actually implemented.

Worldwide markets still rose Monday after deputies defied 100,000 demonstrators in Greece’s biggest cities to adopt another round of stringent budget measures demanded by international creditors.

“Greece is a now a highly combustible mix of economic collapse, political corruption, social discontent and human suffering,” said Sony Kapoor, head of Re-Define, a Brussels economic think tank.

“Considering the explosive situation in Greece,” said Lutz Karpowitz of Germany’s Commerzbank, “it would hardly come as a surprise if those opposing the reforms were to take control of the country.”

The vote in Athens also appeared to give Italy a boost when the government in Rome raised 12 billion euros in a bond auction, at easier borrowing rates.

But later Monday, Fitch Ratings lowered the credit rating of Spain’s four largest banks, and China too cautioned that the eurozone debt crisis remains at a “critical juncture.”

Then came the boom from Moody’s, which further downgraded the sovereign debt ratings of Italy, Spain and Portugal, and placed negative outlooks on AAA-rated France, Britain and Austria, a warning that if conditions worsen they could be hit with full downgrades.

Ratings were also cut for Slovenia, Slovakia and Malta, with Moody’s saying all nine countries were increasingly susceptible to financial and macroeconomic risks from the eurozone crisis.

“To a varying degree, these factors are constraining the creditworthiness of all European sovereigns and exacerbating the susceptibility of a number of sovereigns to particular financial and macroeconomic exposures,” Moody’s said.

Italy was cut one notch to A3 from A2; Spain two notches to A3 from A1, and Portugal one step to Ba3 from Ba2. Slovakia and Slovenia both went down one step to A2, while Malta moved one step to A3.

France already had lost its AAA rating with the S&P ratings agency, and recession-wracked Britain was put on negative outlook despite not being a member of the eurozone and having slashed its budget.

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