Greece is due to receive the next installment of its original, €110 billion ($158 billion) bailout in September. But Italy and Spain, both of which committed to extend bilateral loans to Greece with other euro-zone countries, have seen their own borrowing costs rise recently.
Living up to that commitment could put further pressure on Italian and Spanish bonds, just as officials in Madrid and Rome have been scrambling to reassure markets. Euro-zone finance officials are now considering allowing Italy and Spain to opt out of the payment, according to people familiar with the matter.
"We're trying to get around this obstacle by getting the EFSF to finance the next tranche," one official said, referring to the European Union's rescue fund, the European Financial Stability Facility. "The only problem is this is on very short notice."
If the rescue fund isn't ready to lend to Greece, Italy and Spain might be called on to make loans directly, potentially exacerbating tensions in the Spanish and Italian sovereign-debt markets.
Greece, the first euro-zone country to receive a bailout, was given direct loans from its partners because the EFSF, which has a lending capacity of €440 billion, hadn't been set up.
Euro-zone leaders at their summit last week directed the EFSF to make the next loan payment of €5.8 billion to Greece, replacing the bilateral loan system that euro-zone governments set up in 2010. But the rescue fund must first raise money on financial markets. That could be difficult by mid-September—particularly during August when most of Europe is on vacation.
Complicating matters is the requirement that several national parliaments back new rules for the EFSF before the fund can lend to Greece.
One remedy discussed by the governments would be for the EFSF to pay part of the mid-September tranche, with the rest paid through loans directly from governments, the official said.
The first Greek bailout agreement allows countries with funding costs higher than the interest rates on the Greek loans to be compensated by the interest payments earned by other euro-zone governments. The pact also allows these countries to avoid making a payment altogether.
Spain's 10-year bonds are yielding 6.12%, and Italy's 10-year yields 5.92%—both well above rates Greece pays on loans under the first bailout program.
EFSF loans wouldn't face this problem: Guarantees from the euro zone's six triple-A-rated countries—Germany, France, the Netherlands, Finland, Austria and Luxembourg—are enough to back the fund's entire €440 billion lending capacity. That ensures the EFSF will keep its triple-A rating and low funding costs even if more countries need to borrow from it.