Euro Finance Chiefs Set to Defer Decision on Greek Aid Packa
Louisa Gouliamaki/AFP/Getty Images
A general strike against austerity in Athens on Feb. 7, 2012.
A general strike against austerity in Athens on Feb. 7, 2012. Photographer: Louisa Gouliamaki/AFP/Getty Images
Feb. 9 (Bloomberg) — European Central Bank President Mario Draghi talks about the euro-zone economy and Greek debt negotiations.
Draghi, speaking at his monthly news conference in Frankfurt, said the European economic outlook is subject to “high uncertainty.” (Source: European Central Bank)
Feb. 9 (Bloomberg) — Charles Dumas, chairman of Lombard Street Research Ltd., talks about austerity measures in Greece and Europe’s sovereign-debt crisis.
European finance chiefs are set to defer endorsing a decision on a $173 billion rescue for Greece, saying they still need to examine the austerity deal struck by Greek leaders today. Dumas speaks with Tom Keene on Bloomberg Television’s “Surveillance Midday.” (Source: Bloomberg)
Feb. 9 (Bloomberg) — Daragh Maher, a strategist at HSBC Bank Plc, talks about the European debt crisis and currency markets.
He speaks on Bloomberg Television’s “InBusiness with Margaret Brennan.” (Source: Bloomberg)
Feb. 9 (Bloomberg) — Irish Prime Minister Enda Kenny talks about the nation’s sovereign debt, conditions for re-entering international credit markets and outlook for the economy.
He spoke with Bloomberg’s Margaret Brennan in New York yesterday. (Source: Bloomberg)
Greece Debt
Aris Messinis/AFP/Getty Images
A general strike gripped Greece in protest against new austerity measures demanded with increasing urgency by the European Union as part of a debt rescue deal with banks.
A general strike gripped Greece in protest against new austerity measures demanded with increasing urgency by the European Union as part of a debt rescue deal with banks. Photographer: Aris Messinis/AFP/Getty Images
Greece EU
Olivier Hoslet/EPA/Landov
Greek finance minister Evangelos Venizelos with International Monetary Fund (IMF) Managing Director Christine Lagarde in Brussels on Feb. 9, 2012.
Greek finance minister Evangelos Venizelos with International Monetary Fund (IMF) Managing Director Christine Lagarde in Brussels on Feb. 9, 2012. Photographer: Olivier Hoslet/EPA/Landov
European finance chiefs are set to
defer ratifying a 130 billion-euro ($173 billion) rescue for
Greece, pressing the government in Athens to put a newly struck
austerity plan into action.
“It’s up to the Greek government by concrete actions –
through legislation, other actions — to convince its European
partners that the second program can be made to work,” European
Union Economic and Monetary Affairs Commissioner Olli Rehn said
today as he arrived for an emergency meeting of euro-area
finance ministers in Brussels.
European stocks rose for the first time in four days and
the euro reached a two-month high against the dollar as the
accord in Athens after all-night talks spurred optimism over
enactment of the financial lifeline and debt-swap agreement
needed for Greece to dodge default and economic collapse.
“There is clearly some very encouraging news coming out of
Athens,” International Monetary Fund chief Christine Lagarde
told reporters before the meeting. “It’s positive.”
European Central Bank President Mario Draghi and Executive
Board member member Joerg Asmussen joined the talks after the
bank’s governing council met in Frankfurt. Representatives for
private-sector creditors who have been negotiating the bond
swap, the Institute of International Finance’s Charles Dallara
and Jean Lemierre, are also on hand.
Resolution of the aid talks, which have dragged on since
July, would allow Greece to make a 14.5 billion-euro bond
payment on March 20 and contain the threat that speculators will
target debt-addled nations including Italy and Portugal.
“The euro zone needs to be stabilized,” Irish Finance
Minister Michael Noonan said.
‘General Agreement’
Investor attention switched to the Brussels after a focus
on Athens the past week. More than six days of talks stalled
overnight over 300 million euros of pension cuts. Discussions
were later resolved with Prime Minister Lucas Papademos
declaring a “general agreement.” He didn’t disclose details.
Seeking to reduce Greece’s debt to 120 percent of gross
domestic product from 160 percent last year, Papademos and party
chiefs agreed to extend budget cuts this year by 1.5 percent of
GDP. Measures range from a 20 percent reduction in the minimum
wage to lower pension payments and immediate job cuts for as
many as 15,000 state workers.
Bondholders meeting in Paris today discussed accepting an
average coupon of as low as 3.6 percent on new 30-year bonds in
the proposed debt swap. An agreement would slice 100 billion
euros off more than 200 billion euros of privately-held debt and
a formal offer must be made by Feb. 13 to allow all procedures
to be completed before the March 20 bond comes due.
Creditors’ Deal
“We have also a deal with the private creditors,” Greek
Finance Minister Evangelos Venizelos said. “We need now the
political endorsement of the eurogroup for the final step.”
In Frankfurt, Draghi left the open the possibility the ECB
will participate in the debt relief by giving up some of the
profits of the Greek bonds it has bought during the crisis. He
nevertheless rejected selling the bonds to Europe’s temporary
bailout fund at a loss because doing so would amount to
“monetary financing” of governments, which is banned by
European treaties, he said.
The price Greece pays for outside support may be a deeper
recession as its economy contracts faster than originally
estimated. Unemployment climbed in November to 20.9 percent.
That backdrop has led politicians to fret about losing voter
support ahead of elections that may come as soon as April.
Striking workers this week derided the conditions demanded for
outside aid as “blackmail.”
The finance officials arriving in Brussels noted the
progress made since a Feb. 4 conference call with Venizelos that
he subsequently described as “very difficult.”
‘30 Seconds to Midnight’
“The Greeks understand that it’s not five minutes to
midnight but 30 seconds to midnight,” Luxembourg Finance
Minister Luc Frieden said. “The fact that we’re meeting in
Brussels after the meeting was postponed several times is a sign
that something is happening, that Athens understood our message
from the telephone conference on Saturday,” he said.
Greek lawmakers are set to convene this weekend to begin
voting on the austerity measures, Christos Protopapas, a
spokesman for the Pasok socialist party, said today. An
implementation law will be considered in the next 10 to 15 days,
he said.
It’s now more than two years since Greece sparked a
regional crisis by revising its budget math. Failure to contain
it led to Portugal and Ireland requiring bailouts and has
propelled the euro-area economy toward its second recession in
three years and forced the ECB to issue emergency loans to keep
banks from failing.
Turmoil Easing
Signs have grown that the turmoil may be easing with
Bloomberg indexes of Europe’s banks and financial conditions
rising to the highest since August and bond yields from Italy to
Spain falling. Italian Prime Minister Mario Monti was today
praised in Washington by President Barack Obama for “taking
impressive steps” after pushing through 20 billion euros in
fiscal cuts and reducing regulations.
A Greek deal would allow Europe’s leaders to begin talks on
whether to increase a planned limit of 500 billion euros on
overall rescue lending that will take effect in July when a
permanent rescue fund comes on line aside the temporary European
Financial Stability Facility.
Increasing the so-called firewall has been identified by
foreign governments as a prerequisite for more money for the
International Monetary Fund, which wants a $500 billion fillip
to insulate the global economy from Europe’s travails. Mexican
Finance Minister Jose Antonio Meade said yesterday the Group of
20 nations is unlikely to agree on extra cash for the lender
when finance chiefs meet in two weeks.
To contact the reporters on this story:
Simon Kennedy in Brussels at
skennedy4@bloomberg.net;
Josiane Kremer in Brussels at
jkremer4@bloomberg.net
To contact the editor responsible for this story:
James Hertling at
jhertling@bloomberg.net
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