Heads of the 27 European Union states meet in Brussels on Thursday and Friday, with plans for a second emergency loan package for Greece at the top of the agenda.

Before the meeting, German Chancellor Angela Merkel welcomed the Greek parliament's vote of confidence in Prime Minister George Papandreou, but said budget pruning is "an important precondition" for the aid.

In an address to a parliamentary committee, the chancellor said eurozone nations offering help to Greece wanted the Mediterranean country's conservative opposition to rally behind Papandreou and support the budget cuts.

"But that is looking harder to achieve than in Portugal's case," she said, referring to bipartisan support for budget cuts in Lisbon.

Papandreou's cabinet approved a five-year austerity plan on Wednesday, the first step toward making the budget cuts official. Parliament must still approve the legislation so Greece can get the next installment of its 110-billion-euro ($157-billion) loan package from the EU and the International Monetary Fund (IMF).

'If Athens acts, Europe will deliver'

Papandreou made a special trip to Brussels earlier this week to put minds at rest that his government was doing all it could to reach consensus on its austerity program.

"I'd like to say that we are determined as a country and as a government to be on track with the program, and I do hope that the Greek parliament will be approving the program we have in front of us," he said ahead of the parliamentary decision.

European Commission President Jose Manuel Barroso also said Greece needs domestic support for the austerity measures if it wants a second round of aid from the EU.

"Next week is the moment of truth where Greece needs to demonstrate that it is generally committed to the ambitious package of further fiscal measures and privatizations put forward by Prime Minister Papandreou's government, and agreed with the European Union and the IMF," he said. "My message is clear: If Athens acts, Europe will deliver."

More than a European problem

Greece's enormous debt burden has made international lenders worried that it will not be able to pay back government bonds. The EU-IMF loan appears to not be enough to keep the government solvent.

John Lipsky, IMF interim chief, said on a trip to Brussels on Monday that a default on Greek debt would be a problem for more than just Europe.

"The euro area is, as we all know, a critically important global economy," he said.

"Our analysis suggests that the spillovers from the ongoing difficulties in the periphery... are of course relatively small because these are relatively small economies. But it also shows that the crisis would be felt much more strongly around the world if it were to affect banks in the core economies of the euro area."

EU member number 28

A deal to end EU accession talks with Croatia, which celebrates its 20th anniversary of independence on the weekend, also seems to be within reach.

Hungarian Foreign Minister Janos Martonyi, whose country holds the EU's rotating presidency until the end of the month, said EU foreign ministers on Monday suggested that the bloc's heads of state finalize Croatia's entry negotiations.

"Outstanding issues are now being discussed and resolved and there is now a fair chance indeed that accession negotiations will be concluded by midnight, June 30," he said. That would allow Croatia to become the bloc's 28th member state on July 1, 2013.

Author: Christoph Hasselbach, Brussels / db / acb
Editor: Martin Kuebler