'This will help prevent Greece defaulting on its debt repayments due next month and ensure that it will remain solvent until September,' EU Commissioner for Monetary Affairs Olli Rehn said.
Amid growing political unrest in Greece and escalating protests against the government's austerity measures, the European Union (EU) has postponed a decision on a second multi-billion euro rescue package for the debt-ridden nation at least until mid-July.
However, the European Commission, the executive arm of the 27-nation EU, said on Thursday that a bankruptcy will be averted by releasing the fifth tranche of €12 billion from last year's bailout package of €110 billion ($159 billion) when euro zone finance ministers meet in Luxembourg over the weekend.
This will help prevent Greece defaulting on its debt repayments due next month and ensure that it will remain solvent until September, EU Commissioner for Monetary Affairs Olli Rehn said.
He proposed that the euro zone nations decide on a second rescue package for Greece at the meeting of their finance ministers on July 11.
"Thereby, we can avoid a credit default scenario and clear the way for a medium-term strategy," he said in a press statement in Brussels.
He called upon the euro zone finance ministers to overcome their remaining differences and to reach a responsible agreement at this critical juncture.
The EU decision came as Greece's embattled Prime Minister George Papandreou struggled to form a new Cabinet and to win Parliament's support for new austerity measures, which sparked strikes and protests.
Germany is reported to have asked for deferring a decision on a second rescue package for Greece until September to win the support of all EU partners for its highly contentious proposal to involve private creditors in the bailout after the euro zone finance ministers could not narrow down their differences on this issue at their meeting in Brussels on Tuesday.
But Greece, Ireland and Portugal, the three euro zone nations which received a bail-out from the EU and the IMF, as well as Spain, Italy and Belgium, have voiced their opposition to the German proposal.
They are pressing for a decision latest by mid-July, warning that by prolonging their discussions, the euro zone nations will not only increase the nervousness in financial markets, but would also contribute to a contagion, media reports said.
Germany's proposal to delay a decision on a second financial rescue package for Greece has added a new dimension to the dispute among the euro zone partners on how to tackle the debt crisis in Greece, which lingered on even after it received a €110 billion bailout from the EU and the IMF in May last year and is threatening once again to engulf the entire euro area.
A second rescue package ranging between €90 billion and €120 billion has become necessary after tough austerity measures implemented by the Greek government in return for the EU-IMF aid failed to stabilise the economy.
Greece's national debt has soared to a staggering €350 billion, its budgetary deficit has widened, unemployment has risen to around 16% and economic growth has stagnated at around 0.2%.
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