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Greek PM Papandreou cancels US trip

Greece's prime minister has cancelled his trip to the United States because of the gravity of his country's financial crisis, officials said.

George Papandreou, who had left for London en route to New York, will return to Greece, officials said.

Papandreou had been scheduled to attend the UN General Assembly and then the annual meeting of the International Monetary Fund, where he was to meet managing director Christine Lagarde and US treasury secretary Timothy Geithner.

"The prime minister decided to postpone his scheduled visit to the US because the coming week is especially critical for the implementation of the eurozone's decision of July 21 and the initiatives (Greece) must undertake," according to a statement released by Papandreou's office.

On July 21, eurozone leaders and the International Monetary Fund agreed to grant debt-ridden Greece a new bailout worth 109 billion euros (£95 billion) to keep its finances afloat. The bailout would come on top of a 110 billion euro package agreed in May 2010.

The eurozone and the IMF had also agreed that the maturity of Greek loans would be significantly extended and interest rates cut with the help of banks and other private investors who would either swap Greek bonds for new, lower-rate ones or sell the bonds back to Greece at a low price.

State TV NET and private Mega Channel, citing unidentified government sources, said Papandreou had decided to return to Greece following a consultation with finance minister Evangelos Venizelos.

While the government did not specify what was at stake, Venizelos, who attended a eurozone meeting in Wroclaw, Poland, told Greek media that there are "delays and ambivalence" among eurozone members. "These may harm the eurozone, but will be catastrophic for us," Venizelos said without elaborating.

The finance minister alluded to problems regarding the sixth instalment from Greece's first rescue package, originally due to be paid by the EU, the European Central Bank and the IMF some time in September. Greece has not met the fiscal target it has agreed to and, last week, the government was forced to announce a new property tax that it hopes would provide about two billion euros (£1.7 billion) in revenue this year.

Eurozone officials said Friday they would not decide until October on whether Greece had met conditions to receive the next instalment. "The specific timing of the payment (of the instalment) is an important issue. Everyone knows how our reserves are developing," he said.

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