Eurozone finance ministers have backed a compromise between Germany and France that calls for private lenders to finance Greece's second bailout through "informal and voluntary rollovers."

German chancellor Angela Merkel originally had asked that private sector participation in a restructuring of Greece's debt be made mandatory. shaking the financial markets and drawing protests from private banks, in particular French banks that own the lion's share of Greek junk bonds.

Being the pragmatist she has become on the financial crisis and other burning issues such as nuclear power, Merkel relented. She now says private sector contribution should be voluntary, a victory for the banks and the French. 

Under the compromise backed in Luxembourg, banks, insurers and investment funds can voluntarily decide to buy new bonds with longer maturities. 

Under Berlin's original plan, private lenders would have swapped their bonds for new ones with a seven year maturity, giving Greece more time to get its finances in order.

"It has to be made clear that the risk will not be carried unilaterally and alone by the community of taxpayers," German Finance Minister Wolfgang Schäuble said as he arrived in Luxembourg.

This "rollover" option is favored by the ECB and France because it avoids the risk of rating agencies declaring Athens in default, whichwould send shock waves through the global financial system.

Eurozone finance ministers have also decided that Greece must accelerate austerity measures before it can receive an additional 12 billion euros ($17 billion) in emergency loans to prevent it from defaulting on its public debt.

The ministers said in a statement after their meeting in Luxembourg that they believe the emergency loans will be released by mid-July.

The timetable depends, however, on the Greek parliament passing laws on fiscal reform and selling off state assets."I cannot imagine for one second that we will commit to finance Greece without knowing that the Greek parliament has voted," Eurogroup President and Luxembourg's Prime Minister Jean-Claude Juncker said.

Dutch Finance Minister Jan Kees de Jager warned that Holland would disburse no money to Greece if its parliament did not approve cuts to the tune of 28 billion euros. Privatization is expected to generate some 50 billion euros in savings.

The non-eurozone members of the Group of Seven (G7) industrialized nations - the United States, Canada, Japan and Britain - also participated in the meeting via conference call, highlighting the global concern regarding Greece's debt woes.

In May last year, the EU and IMF agreed to lend Greece 110 billion euros, but the loan is conditional on the government implementing a series of austerity measures.

The move has sparked nationwide strikes, rallies and protests on the streets of Athens.

germerica/DW-World