November 22, 2024

You are here: Home / Archives for international lenders

Merkel Vows Support for Portugal

November 12, 2012 by Leave a Comment

Even as finance ministers from the 17 euro zone countries gathered in Brussels to consider the release of €31.5 billion, or $40.1 billion, in aid for Greece, Ms. Merkel expressed confidence that the troika of international lenders that has bailed out both Greece and Portugal would issue a favorable report on Lisbon’s efforts at reforming its economy.

As Ms. Merkel arrived in Lisbon for a six-hour visit with Portuguese leaders, she was greeted by statues shrouded in black mourning cloth and shouts of “Merkel out!” from hundreds of protesters, who were largely outnumbered by the police. She received an even harsher reception when she visited Athens last month.

Earlier Monday, the Greek government pushed through Parliament a tough budget for 2013 with a raft of spending cuts and tax increases, moving the country closer to unlocking the next installment of aid from the troika of international lenders: the European Commission, the European Central Bank and the International Monetary Fund.

More than any other public figure, the German chancellor has been made the scapegoat of Europeans battered by the three-year-old sovereign debt crisis and the austerity measures governments have imposed to combat it. But she responded to Portuguese protesters with sympathy and optimism, similar to her soothing words to 40,000 angry demonstrators last month in Greece.

“I feel a great sense of determination here in Portugal to overcome this difficult phase,” Ms. Merkel said at a news conference in Lisbon, carried live on German television, after holding talks with Prime Minister Pedro Passos Coelho.

Public anger in Portugal, for years regarded as Europe’s model bailout recipient, has swelled in recent weeks as Mr. Coelho’s center-right coalition government has raised taxes and reduced spending in return for a bailout of €78 billion from the troika. The government is predicting a third straight year of recession in 2013, with unemployment reaching nearly 16 percent, and more than twice as many young people out of work.

“I know that it’s very hard for some people. Unemployment is high, especially among young people,” Ms. Merkel said. “Consequently, Germany in particular wants to support Portugal through professional training for young people.”

Traveling with Ms. Merkel was a business delegation from Germany that held talks with Portuguese executives to identify specific areas where improved cooperation could foster growth. The German business leaders praised Portugal’s efforts, but warned that more was needed before investors’ confidence could be won back.

“Portugal has so far fulfilled all its savings duties,” Paul Bauwens-Adenauer, of the German business forum DIHK, said in a statement. “The path of reforms it has started out on deserves recognition, but it must continue to be seriously implemented.”

In Greece, most members of the governing coalition voted for the budget, which calls for €9.4 billion in cuts to salaries, pensions and social benefits, raises the retirement age to 67 from 65 and imposes higher taxes. Addressing lawmakers before the vote, Prime Minister Antonis Samaras said the new cuts would be the last and he appealed to the troika to support his country.

The budget vote was regarded as a test of confidence in Greece’s shaky coalition after a vote last week on a €17 billion package of austerity measures and fiscal overhauls for the next four years.

“Greece has done its part,” Mr. Samaras said. “Now it’s the turn of the lenders.”

In Brussels, euro zone finance ministers were unlikely to sign off on a long-delayed tranche of aid for Greece ahead of a final report by the troika on reforms Athens agreed to make as a condition of receiving two bailout packages totaling €240 billion.

Greece is also wrestling with the troika over how best to make sustainable the country’s huge debt burden, estimated at 175 percent of gross domestic product this year and 189 percent for 2013.

Niki Kitsantonis reported from Athens.

Article source: http://www.nytimes.com/2012/11/13/business/global/merkel-vows-support-for-portugal.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Euro Watch: Merkel Praises Irish Leader for Progress Against Debt

November 3, 2012 by Leave a Comment

But more than accumulating honorary awards, Mr. Kenny would like to strike a deal on his country’s outstanding bank debt that would enable Ireland to resume raising money in the financial markets once its bailout money runs out.

German lawmakers and Chancellor Angela Merkel herself are quick to praise the Irish for the stoicism and determination with which they have responded to the demands that international lenders imposed in exchange for an €85 billion, or $110 billion, bailout in 2010. Those measures included deep budget cuts and higher taxes on Ireland’s already hard-pressed public.

“We have established that there is a special situation in Ireland, we are interested in a sustainable completion of the adjustment program,” Ms. Merkel said Thursday in Berlin, appearing alongside Mr. Kenny after the two met privately.

Germany cannot single-handedly grant Ireland’s wishes, of course. The Irish bailout was brokered by the so-called troika of lenders: the European Commission, the European Central Bank and the International Monetary Fund. But as the main European financier, Germany has clout.

Ms. Merkel on Monday dispatched her finance minister, Wolfgang Schäuble, to Dublin to hold talks with his Irish counterpart in an effort to find a deal.

When Ireland applied for its bailout from the euro zone fund in 2010, the financing was largely used to pay down banking debt that had ballooned during the 1990s, when the country became known as the Celtic Tiger, before the collapse of the Irish real estate market.

And Ireland has kept up its part of the bargain — unlike Greece, which required a second bailout and continues to struggle to satisfy its international lenders that it has exercised enough budget discipline to merit its next loan installment of €31.5 billion, or $40.7 billion, to avoid defaulting by the end of next month.

Ireland last week passed its eighth consecutive review by the troika. Mr. Kenny’s government has projected that the government budget deficit, which at its peak was 32.4 percent of gross domestic product, will be down to 8.6 percent of G.D.P. this year. And he said the government remained on track to reach its goal of 3 percent by 2015.

To honor Ireland’s diligence, and Mr. Kenny’s role in it, the German publishers plan to present him next week with a golden statuette: a replica of the mythical winged goddess who stands atop the Victory Column in the heart of Berlin.

“I think this award is absolutely justified,” Ms. Merkel said Thursday, “considering that what Ireland has achieved in terms of reforms, the changes the improvements in competitiveness and with that Ireland is one of the exceptional examples that Europe will emerge from this crisis stronger than it entered this crisis.”

But it would be hard-won strength.

Ireland is still grappling with high unemployment. Domestic consumer spending has been slow to pick up. And the government remains burdened with the staggering debt that it took on to recapitalize the country’s banks.

Against this backdrop, Dublin had hoped that once the European Stability Mechanism — the new, permanent European rescue fund — was in place, Ireland would also be able to draw from it to help finance its banking debt.

The chancellor has dashed that hope, insisting after a meeting of European leaders in Brussels last month that “if recapitalization is possible, it will come for the future.”

Although Ms. Merkel had been talking about Spain, the remark had reverberations in Dublin. That led to consultations by Ms. Merkel and Mr. Kenny, which continued with the meeting Thursday.

At the news conference, Mr. Kenny thanked the chancellor for her support of his country’s efforts, which he described as “an enormous challenge.”

On Jan. 1, Ireland takes over the rotating presidency of the European Union. Mr. Kenny said his government planned to focus on promoting growth and jobs and stabilizing the euro.

Article source: http://www.nytimes.com/2012/11/02/business/global/daily-euro-zone-watch.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

In Hungary, Protests Fail to Block Disputed Legislation

December 24, 2011 by Leave a Comment

Former Prime Minister Ferenc Gyurcsany, a Socialist, was among the lawmakers protesting, and he was briefly detained along with several other opposition lawmakers.

Parliament, where the governing center-right Fidesz Party of Prime Minister Viktor Orban has a two-thirds majority, passed a financial stability law despite objections by the European Union, a development that could imperil talks about a new financing accord with international lenders.

Hungary is trying to secure the deal with the International Monetary Fund and the union so it can retain access to market financing next year, but informal talks have collapsed, leading to a downgrade in Hungary’s debt rating to junk status by Standard Poor’s.

Parliament also passed an election law that critics said would alter the electoral system to favor Fidesz.

Andras Schiffer, leader of the small opposition party Politics Can Be Different, whose deputies chained themselves outside Parliament, told a crowd of about 3,000 people that the prime minister had betrayed voters.

“Viktor Orban wants to cement an economic policy that will push Hungary into default,” Mr. Schiffer told the crowd.

Mr. Gyurcsany was forcibly removed from the morning demonstration, as were the lawmakers from Politics Can Be Different, known by its Hungarian abbreviation L.M.P.

The police later detained several Socialist lawmakers who tried to prevent L.M.P. activists from being removed. Those detained were later released.

“Orban’s autocracy can no longer tolerate even peaceful opposition and protest,” Mr. Gyurcsany said after he was released.

The police said they had intervened because the protesters, by chaining themselves to the barriers, had blocked members of Parliament from entering the building and had failed to obey requests to leave.

The government’s financial stability law makes permanent a flat personal income tax, which the opposition says would tie the hands of future administrations. But the government contends that the tax will improve the economy’s competitiveness.

Peter Kreko, an analyst at Political Capital, a research organization, called the police action unacceptable. “These pictures which show police removing opposition lawmakers, well, we see such photos in undemocratic countries,” he said. “What the government can achieve with this is that its isolation from the West can become much stronger, both economically and politically.”

Since it was swept into power last year, Mr. Orban’s government has tightened its grip on the news media, curbed the rights of the top Constitutional Court, renationalized private pension assets and dismantled an independent budget oversight body.

The United States has urged the government to respect democratic freedoms.

On Thursday, Mr. Orban rejected the European Commission’s request to withdraw two disputed measures, a decision that could derail talks with lenders about a new financial accord. Analysts say the dispute could set off a market crisis.

The European Commission president, José Manuel Barroso, had asked Mr. Orban to scrap the two measures — the financial stability law and legislation on Hungary’s Central Bank, which the European Central Bank says infringes on the Hungarian bank’s independence.

The commission said it was assessing Hungary’s response.

The government has argued that the financial stability law is essential to maintain stable budgets and debt reduction.

Parliament passed several amendments to the Central Bank bill on Friday to bring it in line with the European Central Bank’s requests, but it left some contentious parts in. Parliament is scheduled to vote next week on the Central Bank bill.

Article source: http://www.nytimes.com/2011/12/24/world/europe/in-hungary-protests-fail-to-block-disputed-legislation.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Grübel Resigns at UBS After Adoboli Rogue Trading Scandal

September 24, 2011 by Leave a Comment

The resignation was a dramatic fall for Mr. Grübel, who came to be known as “Saint Ossie” for reviving Credit Suisse, another Swiss banking giant, before he was hired out of retirement two and a half years ago to do the same at UBS.

Mr. Grübel decided that the $2.3 billion loss as a result of unauthorized trades by a midlevel employee had made it impossible to run a bank that has lurched from crisis to crisis in recent years and desperately needs to repair its reputation.

“I did not take the step of resigning lightly,” he wrote in an e-mail to staff on Saturday. “I am convinced that it is in the best interests of UBS to approach the future with a new leader.”

He also said the trading scandal had “worldwide repercussions, including political ones.”

The case has added to a global debate about whether there should be more stringent regulations for banks that are so big or interconnected — like UBS — that their problems can spread distress throughout the financial system. In 2008, for instance, UBS required a bailout from Swiss taxpayers after sustaining billions of dollars in losses.

UBS is one of Europe’s biggest banks, and the trading scandal provided another shock to a financial system that is already in a fragile state. European banks have been facing increasing difficulty maintaining the trust of investors and international lenders, making it difficult for them to raise the money they need to do business.

UBS reiterated on Saturday that it had enough capital to cover the trading loss not to seriously threaten the overall health of the bank.

If anything, the UBS episode strengthens the hand of regulators who have called for tighter regulation and insisted that Switzerland’s two biggest banks, UBS and Credit Suisse — whose combined assets are four times the size of the Swiss economy — be required to keep more capital in reserve than smaller banks.

The biggest banks, advocates of tighter regulation maintain, still do not have their risks under control and have not learned the lessons of the 2008 financial crisis.

The chairman of UBS, Kaspar Villiger, said the top priority for the bank was to overhaul its investment banking operation, which has been troubled for years. UBS plans to scale back the unit, which is run by Carsten Kengeter, by cutting parts of the business that require more capital, like credit.

UBS named Sergio P. Ermotti, head of Europe, the Middle East and Africa, as the interim chief executive.

The search for a new chief executive could take up to six months, Mr. Villiger said.

Initially, after a 31-year-old trader in the bank’s London office, Kweku M. Adoboli, was arrested on Sept. 15 and accused of making billions of dollars in unauthorized trades dating to 2008, Mr. Grübel seemed to hold out the possibility of staying at UBS.

“If you ask me whether I feel guilty, I would say no,” he told Der Sonntag, a Swiss newspaper, in the days after Mr. Adoboli’s arrest.

But when the board started one of its annual meetings in Singapore on Wednesday, he began to consider resigning. Mr. Villiger said that in a string of discussions and chats in the days that followed he tried to persuade Mr. Grübel to stay, but he added that Mr. Grübel ultimately felt that resigning was the right thing to do.

The board members then flew back to Zurich from Singapore and the decision to accept Mr. Grübel’s resignation was made on a conference call, Mr. Villiger said.

Mr. Grübel, 67, will not receive a severance payment and there is a six-month notice period, Mr. Villiger said.

During his tenure, Mr. Grübel managed to return UBS to profit by reversing client money outflows at its private banking business and by reducing costs by cutting thousands of jobs.

Julia Werdigier reported from London and Jack Ewing from Frankfurt, and Susanne Craig contributed reporting from New York.

Article source: http://www.nytimes.com/2011/09/25/business/ubs-chief-oswald-grubel-resigns-over-trading-scandal.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Europe to Redouble Efforts to Stimulate Growth in Greece

September 22, 2011 by Leave a Comment

Horst Reichenbach, who heads a task force set up by the European Commission to give technical aid to Greece, said it was important to “give some hope to the Greek population which, as we all know, is at the brink of not accepting any further pain.”

Mr. Reichenbach said that the commission, the Union’s executive branch, was examining ways of allowing E.U. funding to be used to help guarantee increased lending by the European Investment Bank in order to fill a vacuum caused by the inability of Greek banks to lend to businesses. Around €15 billion, or $20 billion, in E.U. structural funds have been allocated to Greece through 2013.

His comments come amid increasing concern that, in addition to pressing for essential changes to the Greek economy, international lenders need to step up their efforts at reversing economic stagnation.

As if to underline the point, Greek transport workers staged a 24-hour strike Thursday, bringing the transit system to a standstill to protest the austerity drive deemed essential by Greece’s creditors. General strikes have been called for Oct. 5 and 19.

Speaking in Parliament on Thursday, the Greek finance minister, Evangelos Venizelos, said that Greece’s situation was “critical” and that the government’s priority was to keep its commitments to foreign creditors so as to avoid what happened to Argentina, which defaulted on its debt in 2001-02.

“The crisis is not what we are living today, namely cuts to wages, pensions and income,” Mr. Venizelos said. “That is our effort to avert against the crisis. The real crisis will be like that of Argentina’s in 2000 — a total collapse of the economy, of institutions, of the social fabric and productive forces of the country.”

He added that a new property tax, part of the additional austerity measures, would apply beyond 2012 and not just for the next two years as stated when the levy was announced this month. But the long-term unemployed would be exempt from the tax as long as their gross annual income was less than €12,000, with that threshold increasing by €4,000 for each child.

Mr. Venizelos appealed for greater honesty in the debate over the economy, saying that the country’s political class must be clearer about the situation and what is required.

“The lies to the Greek people must stop,” he said, adding that now it was time for “work, work and more work” to meet fiscal targets and revive the economy.

The European commissioner for economic and monetary affairs, Olli Rehn, said Thursday that Greece would remain within the euro zone but did not explicitly rule out the possibility of it defaulting.

“An uncontrolled default or exit of Greece from the euro zone would cause enormous economic and social damage, not only to Greece but to the European Union as a whole, and have serious spillovers to the world economy,” Mr. Rehn said during a speech to the Peterson Institute for International Economics in Washington. “We will not let this happen.”

International lenders have to decide shortly whether to release the next installment of aid, worth around €8 billion, without which Greece probably would default in October. Experts from the three international institutions known as the troika — the European Commission, the European Central Bank and the International Monetary Fund — are likely to return to Athens early next week to pave the way for a decision on the next loan.

In the meantime, longer-term work is going on to try to help the Greek government undertake crucial changes, including an overhaul of a tax collection system widely seen as ineffectual. European experts believe that the key to changing the system is the installation of more information technology equipment and the creation of clear rules that reduce the amount of discretion tax inspectors have.

Substantial changes will probably take around a year, said an E.U. official not authorized to speak publicly on the issue, who likened the problem to an iceberg: “The tip looks O.K., but what’s below, everyone tells me, is quite different.”

Niki Kitsantonis reported from Athens.

Article source: http://www.nytimes.com/2011/09/23/business/global/europe-to-redouble-efforts-to-stimulate-growth-in-greece.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Meetings on European Debt Crisis End in Debate, but Little Progress

September 17, 2011 by Leave a Comment

The meetings were highlighted by the appearance by Timothy F. Geithner, the United States treasury secretary, whose advice, and warnings, drew a tepid reaction from the euro zone’s finance ministers. And Mr. Geithner’s rejection Friday of a European idea for a global tax on financial transactions prompted a debate about whether Europe should go ahead on its own.

Meanwhile, with an October deadline looming for international lenders to agree to the release of around 8 billion euros, or $11 billion, of aid to Greece, without which it could default on its debt, George Papandreou, the Greek prime minister, canceled a trip to the United States.

“The coming week is particularly critical for the implementation of the July 21 decisions in the euro area and the initiatives which the country must undertake,” Mr. Papandreou said in a statement on Saturday.

The attendance of an American official at Friday’s meeting was unusual, and Jacek Rostowski, the finance minister of Poland who invited Mr. Geithner, said it showed “unity within the transatlantic family.”

That glossed over the grumbling about Mr. Geithner’s comments from several European ministers Friday, including Maria Fekter of Austria, who publicly said she was unimpressed with Mr. Geithner’s contribution.

Yet the American plea for urgent decisions to shore up the euro zone was echoed Saturday by two European ministers whose nations have stayed outside the single currency.

“The euro zone leaders know that time is running out, that they need to deliver a solution to the uncertainty in the markets,” said George Osborne, Britain’s chancellor of the Exchequer, who told the BBC he wanted action over Greece and the “weakness” in Europe’s banking system.

“The problem is that the politicians seem to be behind the curve all the time,” added Anders Borg, Sweden’s finance minister. “We really need to see some more political leadership,” he said, citing a “clear need for bank recapitalization.”

Almost two months after a deal was struck on a second bailout of Greece, Finland is holding up its implementation by requesting collateral for new loans — a demand that has complicated the negotiations.

Meanwhile, the Greek government must still convince international lenders that it has done enough to justify the release of the next round of aid.

One European official, not authorized to speak publicly, said the ministers “seemed to come to no operational decisions at all.” The only positive news was an outline agreement on new laws to tighten the rulebook for the euro — though that was struck in Brussels.

Saturday’s meeting ended promptly around noon, allowing ministers to leave before a demonstration in Wroclaw against austerity measures in Europe.

But Mr. Geithner’s contribution continued to reverberate after his departure on Friday. Though there was no discussion of it in detail, his idea of increasing the firepower of the 440 billion euro ($608 billion) bailout fund through leverage — as the United States did in some programs in 2008 — prompted debate, but not consensus.

Some European countries consider such a financial transaction tax a way of ensuring that the financial sector contribute to ending the crisis, but others oppose it.

After Mr. Geithner’s comments, Belgium’s finance minister, Didier Reynders, called for Europeans to press ahead.

“I’m sure that if it’s impossible at the worldwide level, we’ll need to organize that in the E.U. and at least in the euro zone, but of course with a lower level of taxation in one jurisdiction than on the worldwide level,” he said.

Mr. Borg ruled out Swedish participation. “We have substantial experience in Sweden,” he said. “Basically most of our derivative and bond trading went to London during the years we had a financial transaction tax, so if you don’t get a solution that is universal, it is very likely to be detrimental for European financial markets.”

Article source: http://www.nytimes.com/2011/09/18/business/global/meetings-on-european-debt-crisis-end-in-debate-but-little-progress.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Greece Approves Tough Measures on Economy

June 30, 2011 by Leave a Comment

Markets rallied globally, and European leaders welcomed the passage of one of the most radical overhauls of the Greek economy since democracy was restored in 1974.

But the changes are deeply unpopular in Greece, where street protests continued, and the Socialist government of Prime Minister George A. Papandreou will need to overcome widespread skepticism that it can carry out the budget cuts, layoffs, tax increases and forced asset sales, beginning with a vote Thursday on putting the measures in effect.

Economists also expressed concern that the austerity program demanded by European and international lenders could end up pushing the Greek economy into a deeper slump, making its debt even harder to pay back. More broadly, critics said they doubted that Europe had done more than postpone a day of reckoning for the euro, with Ireland, Portugal and Spain, as well as Greece, all struggling with slow or negative growth and rising debts.

The passage of the measures, a difficult and possibly debilitating feat for a Socialist Party elected on a social welfare platform, ensures that Greece’s foreign lenders will unlock the next installment of $17 billion in aid that the country needs to meet its debt obligations through August. But analysts in Athens predicted that the existing government might not last much longer than that, suggesting that political and financial uncertainty could continue for some time.

“It’s a giant step in terms of conception,” said Theodore Couloumbis, a vice president of the Hellenic Foundation for European and Foreign Policy, in Athens. “But it’s a baby step in terms of realization or implementation.”

European political leaders have pressed Greece for months to commit to a thorough overhaul of its bloated, state-led economy, and they hailed the vote on Wednesday as offering hope that the debt crisis was manageable.

Chancellor Angela Merkel of Germany welcomed the development as “really good news,” while the president of the European Commission, José Manuel Barroso, and the European Council president, Herman Van Rompuy, said in a joint statement that Greece had taken “a vital step back — from the very grave scenario of default.”

They urged Greek lawmakers to pass the second vote on Thursday on carrying out the measures, adding that “it would also allow for work to proceed rapidly on a second package of financial assistance, enabling the country to move forward and restoring hope to the Greek people.” Officials have promised that they will make more money available to help stimulate growth in Greece if it sticks to its austerity pledges.

Europe has much at stake in making the new bailout a success because several other countries that use the euro face similar, if less immediate, problems of high debt, widespread unemployment and little or no growth. Ultimately, many economists say, the sovereign debt of Greece and some other countries will have to be restructured, with their creditors accepting a discount on the debts’ face value. European officials have so far sought to avoid taking that step.

“If Europe comes together with an appropriate framework, that will enable a default to be avoided,” said Joseph E. Stiglitz, the Nobel-winning economist. “But there’s every sign that Europe won’t do that, so the likelihood of a problem down the line is very significant.”

Kenneth S. Rogoff, a former chief economist at the International Monetary Fund, who is now a Harvard professor, said the Greek vote and the infusion of aid would only buy a little time.

“It’s certainly kicking the can down the road,” Professor Rogoff said. “Greece is basically being bribed not to default. But as long as Greece doesn’t grow briskly for a sustained period, it’s in hot water.”

Hope is also in short supply among many Greeks, who said that the first round of austerity imposed after Greece’s first bailout last year had worsened rather than improved their plight, and that the second round demanded even deeper cuts in many areas.

“Of course things will get worse,” said Thimios Vilias, 35, who said his two-year contract at an insurance company would run out soon and who came out to protest on Wednesday. “The measures won’t do any good for Greece. We have more debt, more debt, more debt, and we have no work,” Mr. Vilias added.

Niki Kitsantonis contributed reporting from Athens, and Liz Alderman from Paris.

Article source: http://www.nytimes.com/2011/06/30/world/europe/30greece.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Merkel Resists Pressure on New Aid for Greece

May 10, 2011 by Leave a Comment

Debt-ridden Greece wants international lenders to further ease terms of the €110 billion, or roughly $160 billion, bailout granted a year ago by the International Monetary Fund and the European Union, and is likely to need additional financing to plug a €27 billion funding hole next year.

On Tuesday, a day after Standard Poor’s cut Greece’s credit rating again, the country paid almost 4.9 percent to raise €1.62 billion of six-month treasury bills, up from 4.8 percent in April. Local investors bought up the bulk of the auction, Reuters reported from Athens.

The Irish government, in the meantime, is watching to see what concessions Greece might win in order to soften its own €85 billion rescue package.

But Mrs. Merkel, as leader of Europe’s strongest economy and the biggest contributor to the rescue package, gave no indication that Germany would be willing to grant more aid — and certainly not at next week’s meeting of E.U. finance ministers.

She said she would wait until officials from the E.U., the European Central Bank and the International Monetary Fund complete their assessment of Greece’s progress, particularly about how it was implementing its “bold reforms.” That report is due in June.

“First we need to hear what the status is,” Mrs. Merkel told the foreign press corps in Berlin. “Only then can I decide what, if anything, needs to be done. We don’t do Greece any favors by speculating about more aid.”

She added that Greece had made progress over the past year, and that it was always known that “it would be a difficult path.” But she said efforts to improve competitiveness and reduce deficits must continue. “Every country should continue with them,” she said.

Mrs. Merkel faced enormous pressure at home last year not to grant a single euro in aid to Greece until Athens had agreed to implement a tough austerity package and a radical savings program across the public sector.

While such public opposition has subsided, Mrs. Merkel now faces opposition within her own coalition. The Free Democrats, her junior partners, want to push through a motion at its party congress this weekend in Rostock to prevent any more rescue packages for indebted euro states.

Mrs. Merkel brushed aside this opposition, saying she was convinced the Free Democrats would support the overall package.

Indeed, with Philipp Rösler expected this weekend to be elected the new leader of the Free Democrats — replacing the foreign minister, Guido Westerwelle — and also taking over the Economics Ministry, Mrs. Merkel can expect more unity inside the coalition, government officials said Tuesday.

In Athens, there has been fury over reports published last weekend by the German news outlet Spiegel Online that said Greece was threatening to leave the euro as a bargaining chip to gain more leeway in paying back the debt.

“These scenarios are borderline criminal,” Prime Minister George Papandreou of Greece told a conference on the Ionian island of Meganisi on Saturday, Reuters reported. “I call on everyone, especially in the E.U., to leave Greece in peace to do its job.”

The German government denied there were discussions on Greece’s return to the drachma.

“There is no such question and such an issue was never raised for discussion at European level,” a government spokesman said .

Still, a new plan may include pushing back Greece’s budget targets, giving it additional aid and a mild restructuring of its sovereign debt, officials and analysts have said.

Irish officials insist that their country’s debt burden, expected by the I.M.F. to peak at 125 percent of gross domestic product in 2013, is manageable — for now.

A leading Irish economist wrote in The Irish Times newspaper on Saturday that the country’s debt would hit €250 billion by 2014, bringing Ireland’s debt-to-G.D.P. dynamics closer to those of Greece. The academic, Morgan Kelly, who has been dubbed Ireland’s “Doctor Doom” for his gloomy predictions, said the country faced bankruptcy because of the E.U. and I.M.F. bailout.

Mr. Kelly accused Patrick Honohan, Ireland’s central bank governor, of putting the European Central Bank’s interests over those of Ireland, which Mr. Honohan denied.

“The fact of the heavy debt and the growth of that debt is a serious problem and needs to be managed in discussion and in negotiation with our European partners,” Mr. Honohan said in an interview with the state broadcaster RTE.

Pat Rabbitte, the Irish minister for energy, told RTE that the interest rate of 5.8 percent that Ireland is paying on its European loans “must be reduced and in my own view the debt must also be rescheduled.”

Prime Minister Enda Kenny said in Dublin on Tuesday that talks on reducing that rate were under way with Ireland’s European partners.

E.U. finance ministers will take the issue up Monday and Tuesday in Brussels, and Irish officials are hoping for a reduction of one percentage point.

“After the meeting next week we will know whether a conclusion can be reached,” Mr. Kenny said, according to Reuters.

German officials, however, backed by the French, have been seeking some concession from the Irish in return for a reduction like the one given earlier to Greece, particularly regarding Ireland’s relatively low corporate tax rate. The Germans want the Irish to come up with some initiative, like agreeing to work on harmonizing the corporate tax base.

Article source: http://www.nytimes.com/2011/05/11/business/global/11euro.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,