Inspectors approve €8bn lifeline for Greece

Athens bailout backed at last, but Slovakian vote on extending fund's powers in doubt

The "troika" of inspectors who are administering the Greek bailout yesterday said they had agreed to release the funds that Athens needs to avoid defaulting on its debts.

The representatives of the European Union, the European Central Bank and the International Monetary Fund said the Greek government had done enough to justify the release of the latest €8bn (£7bn) payment. The officials said in a statement: "The next tranche of €8bn will become available, most likely, in early November."

They warned, however, that the Greek government's efforts to sort out the country's public finances had been patchy and that the administration of George Papandreou, the Prime Minister, still needed to step up its efforts.

They said: "As overall progress has been uneven, a reinvigoration of reforms remains the overarching challenge facing the authorities." The officials also urged the Greek government to "put more emphasis on structural reforms in the public sector and the economy more broadly".

Despite the troika's broadly positive verdict, the German government said it had yet to make up its mind over whether to approve the payment of the funds to Athens. A German Finance Ministry spokesman said: "We'll wait and look at the report, analyse it and then decide what will happen." The statement on Greece coincided with a political crisis in Slovakia, the only one of 17 eurozone nations that has yet to ratify the extension of the powers of the €440bn European Financial Stability Facility (EFSF).

Slovakia's parliament brought down the government on last night by rejecting a plan to expand the eurozone's rescue fund, but the outgoing government said it hoped to pass the measure by the end of the week with opposition support.

Prime Minister Iveta Radicova had made the issue into a vote of confidence to try to prevent one of her coalition partners, the liberal Freedom and Solidarity (SaS) party, from opposing the European Financial Stability Fund (EFSF), but in vain.

Without ratification from all 17 eurozone parliaments, the European bailout fund cannot start to exercise its new powers, which include buying up the sovereign bonds of stressed member states and recapitalising eurozone banks.

Radicova, who held back tears during a news conference after the vote, called on the three like-minded parties in her coalition to approach the leftist main opposition party, Smer, for a way to pass the deal in a new vote. Smer had demanded a reshuffle or resignation in exchange for its support.

Radicova's finance minister, Ivan Miklos, said Slovakia was still likely to find a way to ratify the agreement soon.

Meanwhile, the fragility of Silvio Berlusconi's government in Italy, which is struggling to convince investors of its creditworthiness, was illustrated last night when the tycoon premier failed to have the first article of the budget passed by the lower house.

Mr Berlusconi appeared surprised when the straightforward house-keeping motion to sign-off the books for the 2010 budget failed to obtain a majority, with 290 votes in favour and 290 votes against. Pier Luigi Bersani, leader of the opposition Democratic Party, called for Mr Berlusconi's resignation. "A government defeated on the budget cannot balance the budget and... cannot continue," Bersani said.