Greece Awaits Further Rescue

Εuro-zone finance ministers signed off on a new slice of bailout money for Greece, avoiding a financial meltdown this month, but left themselves with a heavy task ahead to work out details for a new rescue package for the country.

The ministers' agreement in a teleconference call on Saturday evening leaves only the expected approval of the board of the International Monetary Fund before €12 billion ($17.4 billion) is handed over to Athens. The payment is expected by July 15.

The IMF said it welcomed the "euro group's commitment to a financing strategy" for Greece.

Ministers also decided they would agree by September on arrangements for a new bailout to supplement the €110 billion package they agreed on last year but which fell short mainly because Greece is unable to raise money in financial markets as had been expected.

German Finance Minister Wolfgang Schäuble said after the teleconference that a new aid package for Greece could be approved by autumn, in time for the next expected quarterly tranche of EU/IMF aid.

The Greek finance ministry also said a deal was expected by mid-September. The ministers said they will continue to work on ways to encourage holders of maturing Greek government bonds to contribute to the new rescue package.

The ministers said the "precise modalities and scale of private-sector involvement and additional funding from official sources will be determined in the coming weeks."

This is likely to be achieved through encouraging private investors to reinvest some of the proceeds from maturing Greek bonds into new debt. The ministers reiterated their position that any such plan must avoid Greece being declared in "selective default" by credit-rating agencies.

A European official said that even though euro-zone governments may not agree the outlines of the second bailout package by July 11—as they had intended—there would be "full clarity" on private-sector involvement later this month. He said that would include an estimate of the size of private-sector contribution and the overall bailout package. Officials have said in the past they hope for a €30 billion contribution from bondholders by 2014, but it isn't clear if this will be achieved. The rest of the new package is expected to include a €30 billion in contributions from Greek privatizations and as much as €90 billion in new official funds.

"We don't expect any surprises," the EU official said.

Approval for the next payment of last year's bailout had been widely expected after the Greek parliament on Thursday approved a new €28 billion austerity package aimed at shoring up government finances through 2015. That vote took place two weeks after the near-collapse of the Greek government and amid mass street protests. A French official also said on Saturday evening that the ministers are aiming to "work quickly" on the details of private-sector involvement in a second package.

The official, who was briefed on the call, said the finance ministers didn't discuss details of private-sector involvement on Saturday's call but talked about the broad principles that would underlie the participation of private creditors and about the time frame for a plan. The main scenario on the table for private-sector participation is a debt-rollover proposal floated by French banks last week, the official said, cautioning this doesn't mean this proposal would eventually be adopted.

Under the French banks' plan, private creditors would buy €50 of 30-year Greek bonds and €20 of high-grade assets for every €100 redeemed by the Greek Treasury.

The low-risk assets would be put into a fund and serve as a guarantee in case Greece defaulted on the long-term bonds. On Friday, the Institute of International Finance, a Washington-based grouping of more than 400 financial institutions world-wide, recommended that Greece's creditors consider expanding the French plan to include a bond-buyback program.

The IIF proposal wasn't discussed in depth by the ministers, the French official said. On Saturday, the euro-zone finance ministers again urged all Greek political parties to work together and said a new bailout program will depend upon "a continued strong commitment" from Greece "to implementing fiscal consolidation measures as well as ambitious and concrete structural reform and privatization plans."

The ministers also signaled there would be heavy external monitoring of Greek economic policy implementation, saying further financial support would come with "large-scale technical assistance, provided by the Commission and member states."

Luxembourg Prime Minister Jean-Claude Juncker said in an interview published Sunday that Greece must be ready to see foreigners help decide about its privatization program, Agence France-Presse reported.

"The Greeks' sovereignty will be massively constrained," he told the German magazine Focus.

The finance ministers decided to hold a conference call Saturday, canceling plans for a meeting in Brussels on Sunday.

Write to Laurence Norman at laurence.norman@dowjones.com and Nathalie Boschat atnathalie.boschat@dowjones.com