Author Topic: Eurocrats: "Hey Greece, see what we did to Poland? TAKE THE MONEY!"  (Read 4990 times)

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Offline Dig

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Europe agrees $40 bln Greece rescue deal
Published: Sunday April 11, 2010

Europe could lend debt-stricken Greece up to 30 billion euros (40 billion dollars) under a contingency package agreed on Sunday in a bid to restore investor confidence in the continent's economy.

The EU's Economic and Monetary Affairs Commissioner Olli Rehn said the loans would have an interest rate of around five percent, significantly lower than the market rate which Greece has so far been forced to pay.

The Greek government welcomed the announcement but stressed that no request to activate the debt support had been made.

"The total amount put up by the eurozone member states for the first year will reach 30 billion euros," Luxembourg Prime Minister Jean-Claude Juncker, head of the 16-nation eurozone's group of finance ministers, told a joint press conference with Rehn. Related article: Greece ditching Euro 'a joke': PM

Juncker said the financing would be "completed and co-financed by the International Monetary Fund" but did not give further details.

The IMF's role -- which would be unprecedented for a eurozone member state -- is due to be the focus of talks starting on Monday, Rehn said.

The two spoke after a conference call between the finance ministers.

The rescue package is intended as a back-up plan in case Greece is no longer able to raise funds to repay its debts and finance its budget on commercial markets because of excessively high interest rates.

Greece's Finance Minister George Papaconstantinou hailed what he called a "very important decision" but added that it did not mean Greece would take up the offer on the table.

"The Greek government has not asked for the activation of the mechanism, although it is now immediately available," he told Greek television.

"We believe that we will be able to continue to borrow on the markets in an unobstructed fashion."

Prime Minister George Papandreou had earlier described the agreement in the making as a "gun on the table" which is about to be loaded, while dismissing as "a joke" the idea that Athens could ditch the euro.

Germany's agreement was seen as crucial to the deal, with Berlin having insisted that the loans should be at market rates and opinion polls showing strong public opposition to a bailout for Greece.

A senior European official said ahead of the announcement that Sunday's talks were to send a "political message before the markets open on Monday."

Greece's debt crisis has rattled Europe in recent months, sparking investor fears about rising debt levels and pushing down the value of the euro.

Greece has laboured for months to lower its borrowing costs but uncertainty surrounding the EU fall-back plan and market reaction to contradictory claims attributed to Greek officials had steadily dashed its hopes.

The yield on Greek 10-year bonds last week soared past 7.5 percent, its highest since 1998, while the Athens stock exchange lost eight percent of its value in three days before a 3.4-percent gain on Friday.

One of the main credit rating agencies Fitch hit Greece with its latest sovereign debt downgrade on Friday, cutting the country's long-term foreign and local currency Issuer Default Ratings to BBB- from BBB+.

Greece has suffered successive credit downgrades from Fitch and the other two major ratings agencies, Moody's and Standard & Poor's, heightening its risk profile among investors.

Priming the EU aid mechanism comes at exactly the right time for Greece which on Tuesday intends to auction a 1.2 billion euro (1.6 billion dollars) package in treasury bills.

Greece has to find around 11.5 billion euros by next month, part of a total loan blueprint of around 54 billion euros planned for this year to cover debt repayment and urgent budget needs.

Its total debt stands at nearly 300 billion euros.
All eyes are opened, or opening, to the rights of man. The general spread of the light of science has already laid open to every view the palpable truth, that the mass of mankind has not been born with saddles on their backs, nor a favored few booted and spurred, ready to ride them legitimately

Offline larsonstdoc

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Re: Eurocrats: "Hey Greece, see what we did to Poland? TAKE THE MONEY!"
« Reply #1 on: April 11, 2010, 09:26:44 pm »

Notice that a third of this aid is coming from the IMF.

Greece Wins EU45 Billion Aid Pledge to Blunt Crisis (Update1)
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By James G. Neuger and Jonathan Stearns

April 12 (Bloomberg) -- European governments offered debt- plagued Greece a rescue package worth as much as 45 billion euros ($61 billion) at below-market interest rates in a bid to stem its fiscal crisis and restore confidence in the euro.

Forced into action by a surge in Greek borrowing costs to an 11-year high, euro-region finance ministers said yesterday they would offer as much as 30 billion euros in three-year loans in 2010 at around 5 percent. That’s less than the current three- year Greek bond yield of 6.98 percent. Another 15 billion euros would come from the International Monetary Fund.

“This is a huge amount,” said Stephen Jen, managing director at BlueGold Capital Management LLP in London and a former IMF economist. “This is more than a bazooka. They have gone nuclear on the issue of Greece. In the short run the market is short Greek assets so we’ll get a rally in those.”

With the euro facing the stiffest test since its debut in 1999, the 16-nation bloc maneuvered around rules barring the bailout of debt-stricken countries, aiming to prevent Greece’s financial plight from spreading and to mute concerns about the currency’s viability. Germany also abandoned an earlier demand that Greece pay market rates.

No Aid Request

The euro has dropped 5.7 percent against the dollar this year as the discord within Europe over the response to the Greek crisis sapped faith in Europe’s economic management. The single currency rose 0.9 percent to $1.3617 as of 7:06 a.m. in Tokyo after jumping 1 percent on April 9.

Bond investors’ response will determine whether Greece needs to tap the aid, a Greek Finance Ministry official said in Athens yesterday. Finance Minister George Papaconstantinou said the government plans to go ahead with debt sales, including a dollar-denominated bond, without taking up the offer for aid.

The package “sends a clear message that nobody can play with our common currency and our common fate,” Greek Prime Minister George Papandreou told reporters in Larnaca, Cyprus.

Yesterday’s teleconference of euro-region officials, which included European Central Bank President Jean-Claude Trichet, left open just how much Greece might need in 2011 and 2012, the final years covered by the package.

“It shows there is money behind this,” Luxembourg Prime Minister Jean-Claude Juncker told reporters in Brussels yesterday after chairing the conference call. “The initiative for activating the mechanism rests with the Greek government.”

IMF Loan

Europe’s contribution would represent about two thirds of any aid, with the IMF chipping in the rest, European Union Economic and Monetary Commissioner Olli Rehn said.

“We cannot speak on behalf of the IMF, but we know that they are ready to cooperate and contribute with a substantial amount,” Rehn said. Greek, EU and IMF officials will meet today to start working on details.

The IMF was “ready to join the effort,” Managing Director Dominique Strauss-Kahn said an in e-mailed statement, without giving more details on the IMF contribution.

European rhetorical support in February and March failed to prevent Greek 10-year bond yields from soaring to 7.51 percent on April 8, according to Bloomberg generic prices, amid concern that Papandreou’s government will be swamped by its bills.

The jump in Greek yields to the highest since December 1998 helped overcome resistance to an aid package in Germany, which as Europe’s biggest economy would contribute almost a third of the loans, the largest single share.

Germany Backs Down

Germany “has lost the competition,” said Carsten Brzeski, an economist at ING Group in Brussels who used to work at the European Commission. “All that fuss and talk about not putting taxpayer money at risk has been made obsolete.”

The premium investors demand to buy Greek 10-year bonds instead of German bunds jumped to 442 basis points April 8, easing to 398 basis points the next day as speculation over a rescue gained steam.

In the compromise hammered out yesterday, the European loans would be tied to Euribor and priced above rates charged by the IMF, a nod to German opposition to subsidizing a country that lived beyond its means. The EU will offer a mix of fixed- rate and floating rate loans.

The IMF would charge less than the EU. Both types of funding would be offered at the same time, Rehn said. Transfers to Greece would be made by the ECB.

Greece last week raised its estimate of the 2009 deficit from 12.7 percent of gross domestic product to 12.9 percent, the highest in the euro’s history and more than four times the EU’s 3 percent limit.

Deficit Limits

While rules dictated by Germany in the 1990s foresee fines for countries that go over the limit, no penalty has ever been imposed. Germany also led the charge to loosen the rules in 2005 after three years of excessive deficits.

While all euro-region governments vowed to contribute, some would need parliamentary approval. Ireland, itself reeling from the financial crisis, would require “national legislation,” Finance Minister Brian Lenihan said in an e-mailed statement.

The Greek government has yet to request a European lifeline, confident that this year’s planned budget cut of 4 percentage points will stem speculation that it is heading for the euro region’s first-ever default. Fitch Ratings highlighted that risk by shaving Greece’s debt rating to BBB-, one level above junk, on April 9.

A combination of higher taxes, lower spending and salary cuts for public workers have prompted strikes and protests against Papandreou, a socialist elected in October on promises of raising wages.

Maturing Debt

The EU showed no sign of demanding further Greek austerity measures. Rehn hailed the Greek government for implementing “a very bold and ambitious program.”

Greece needs to raise 11.6 billion euros by the end of May to cover maturing bonds, and another 20 billion euros by the end of the year to pay debt coupons and finance this year’s deficit.

The debt agency plans to offer 1.2 billion euros of six- month and one-year notes tomorrow, in a test of investor confidence.

Greece is likely to need money by the end of April, said Erik Nielsen, London-based chief European economist at Goldman Sachs Group Inc. Noting that the budget cuts threaten to cripple the economy, he said in a research note that “this thing is unlikely to go to bed anytime soon.”


Offline Dig

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Re: Eurocrats: "Hey Greece, see what we did to Poland? TAKE THE MONEY!"
« Reply #2 on: April 11, 2010, 09:41:11 pm »
oh man, talk about a deal with the devil.
All eyes are opened, or opening, to the rights of man. The general spread of the light of science has already laid open to every view the palpable truth, that the mass of mankind has not been born with saddles on their backs, nor a favored few booted and spurred, ready to ride them legitimately