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Greece and Lenders Near Deal on New Austerity Measures

July 8, 2013 by Leave a Comment

ATHENS — After a week of tense negotiations, Greece and its foreign lenders were close to a deal on Monday on a new round of austerity measures that must be taken by the country to unlock further crucial rescue aid, with a politically contentious streamlining of the nation’s civil service looking likely.

Greece’s international creditors – the European Commission, European Central Bank and International Monetary Fund – said Monday that they had concluded their latest review of the country’s economic program and reached an agreement that was expected to be approved by euro zone finance ministers meeting in Brussels later in the day.

The lenders, known collectively as the troika, cited “important progress,” referring specifically to an overhaul of the tax system and a recapitalization of Greek banks that is “nearly complete.” But they noted that policy implementation was “behind in some areas.”

It remained unclear early Monday whether the finance ministers would approve the next batch of rescue aid of 8.1 billion euros, or $10.5 billion. Both the Greek finance minister, Yannis Stournaras, and the I.M.F.’s chief envoy to Athens, Poul Thomsen, said late on Sunday that progress had been made and that there was hope for a final deal before Monday’s ministers’ meeting.

The head of the euro zone finance ministers’ group, Jeroen Dijsselbloem of the Netherlands, told reporters in Brussels on Monday that the next loan to Greece might be disbursed in installments. “Whether that is necessary and helpful we will see on the basis of what the troika will present to us,” he said.

The negotiations had faltered last week on Greek pledges for cuts to civil service, a sensitive measure that nearly brought down the government last month after Prime Minister Antonis Samaras unilaterally shut down the state broadcaster, ERT. The move, which put some 2,700 employees out of work, prompted the junior partner in the three-way coalition of political parties to quit.

After much horse-trading, Greece and its creditors agreed on a procedure to put 12,500 civil servants into a so-called mobility program, where staff would receive a reduced wage for several months before being moved to another public sector post or dismissed, according to a government official who asked not to be named because of the confidential nature of the talks. Athens has also pledged to lay off a total of 15,000 civil servants by the end of next year.

Reports that thousands of employees of the capital’s municipal police force would be included in the plan prompted local workers to walk off the job on Monday. On Sunday night, the mayor of Athens, Giorgos Kaminis, was slightly injured after being assaulted by protesting workers while leaving a meeting on the cutbacks with visiting mayors from other Greek cities.

Although the negotiations on the civil service overhaul attracted the most media attention and speculation, the talks between government and troika officials focused on a range of issues. These included a budget gap of around 2 billion euros for 2013 and 2014, which officials have reportedly found ways to plug, chiefly through the control of spending in the health sector. Government officials said they would submit to Parliament a “multi-bill” with all the agreed-to changes as soon as the euro zone finance ministers approve them.

Article source: http://www.nytimes.com/2013/07/09/business/global/greece-and-lenders-near-deal-on-new-austerity-measures.html?partner=rss&emc=rss

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Borrowing Costs Rise for Spain

July 19, 2011 by Leave a Comment

MADRID — Spain sold one-year government bills Tuesday at the highest yield since 2008, underlining broader concerns about the ailing euro zone economies amid tense negotiations over another rescue package for Greece.

In another sign of mounting jitters ahead of a European Union summit meeting Thursday, borrowing from the European Central Bank spiked Tuesday, indicating that many banks are having trouble raising money on open markets.

The treasury of Spain sold €3.79 billion, or $5.4 billion, of 12-month notes as well as €661 million of 18-month securities, meeting the targeted amount. Borrowing costs were much higher than a month earlier, however: 3.702 percent for the one-year bills, compared with 2.695 percent in June. The yield on 18-month bills rose to 3.91 percent from 3.26 percent.

Separately, the E.C.B. reported that banks borrowed €197 billion in its weekly funding operation, the largest amount since February. A total of 291 banks asked for E.C.B. loans, the highest number in four weeks.

When banks borrow from the E.C.B., it often means that other banks are refusing to lend to them at rates competitive with the 1.5 percent that the central bank charges for one-week loans.

The demand for E.C.B. funds was also a sign that bank stress tests carried out by European regulators, whose results were released Friday, had not, as hoped, restored confidence in the banking system.

Five Spanish banks were among the eight institutions that failed the tests, highlighting the Spanish banking sector’s exposure to a collapsed property market. Still, two Spanish savings banks are set to defy volatile market conditions by listing their shares this week, in what is seen as a key test of whether such cajas can tap the stock market to meet stricter capital requirements.

Shares in Bankia are to start trading Wednesday, followed by those of a smaller caja, Banca Civica, on Thursday.

Bankia, formed by a seven-way merger led by Caja Madrid, is the largest among the unlisted cajas. With an initial market valuation of €6.5 billion, Bankia will also be among the country’s biggest listed companies, despite being forced to sharply cut the pricing of its initial public offering to attract sufficient demand.

On Monday, Bankia set a final issuance price of €3.75 per share, 15 percent below its indicative pricing range.

Investor appetite for Spanish government bonds will also be tested Thursday, when the treasury is planning to sell to €2.75 billion of 10-year and 15-year bonds.

In April, when Portugal was forced to join Greece and Ireland in seeking an international bailout, yields on Spanish government debt remained relatively stable. Any notion of decoupling between Spain and other suffering euro economies, however, has since been wiped out by the deepening crisis in Greece, as well as by more recent concerns over Italy’s finances and Prime Minister Silvio Berlusconi’s tense relationship with his finance minister.

Haggling by E.U. leaders over whether, and how, private investors should contribute to a second bailout for Greece has also rekindled contagion fears.

Chancellor Angela Merkel of Germany sought to dampen expectations that the summit meeting would provide the final word. “Further steps will be necessary, and not just one spectacular event which solves everything,” she said, Reuters reported from Hanover.

Last week, the yield spread between Spanish and German government bonds reached 376 basis points, or 3.76 percentage points, the highest level since the launching of the euro.

Concerns about Spain’s own budgetary performance have been stoked by new disclosures about the size of the deficit in some regions, most notably Castilla-La Mancha, following regional elections in May that turned into a debacle for the governing Socialist Party.

The electoral defeat has also raised pressure on Prime Minister José Luis Rodríguez Zapatero to call a general election before the deadline of next March.

Jack Ewing reported from Frankfurt.

Article source: http://www.nytimes.com/2011/07/20/business/global/borrowing-costs-rise-for-spain.html?partner=rss&emc=rss

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Greek Finance Minister Moves From Crisis to Crisis

July 6, 2011 by Leave a Comment

No sooner had he presided over the close passage of a new austerity bill last week, than he was contending with the growing controversy over how much money private banks would contribute by taking on more Greek debt.

And as he prepared to travel to Berlin on Wednesday to make the case to Germany’s finance minister, Wolfgang Schäuble, that Greece could fulfill its end of the bargain, Europe’s assistance was just one of the challenges that lay before him.

“This is a problem for not just Greece and Europe but for the global economy,” Mr. Venizelos said as he sank into a chair in his office late Tuesday evening.

His face was slightly pale and his eyes tired — the consequence of a relentless work pace that takes him from arm-twisting stubborn party members to support the government’s program to leading tense negotiations with Greece’s creditors in Europe.

Outside his office, protesters camp out in Syntagma Square, many criticizing the tough policies that will result in 120,000 public sector workers losing their jobs in the next three years.

Mr. Venizelos acknowledges the deep strains that austerity has brought to Greece, but he argues that in spite of the rising anger there is little appetite for new elections and a change of government.

“Yes, we have protesters on the streets, but according to the polls, the big majority of popular opinion reject the idea of early elections,” he said.

In the eyes of many, though, the Greek government’s task is a fruitless one. Greece must raise 172 billion euros by 2014 — of which 85.6 billion euros will go to paying off bondholders.

In Berlin on Wednesday, Mr. Venizelos will make the case to his European partners that via an aggressive privatization program and other reforms — like opening up closed professions as varied as truck drivers, lawyers, beekeepers and lifeguards — Greece can return to growth in 2012.

Mr. Venizelos also has the tall order of carrying out the measures. “I have no problem about the implementation,” he said. “The problem is the financial stabilization and also the behavior of the different international factors, because we have some asymmetric threats,” he added, referring to the ratings agencies that are watching his government’s every move and every figure in its balance sheets.

Unlike his predecessor, George Papaconstantinou, who was made environment and energy minister in a cabinet shake-up last month, Mr. Venizelos has the role of deputy prime minister, which allows him to convene cabinet meetings at his request.

But the program, which relies heavily on increasing value-added taxes and the levies that Greeks will have to pay on their houses and private boats, in addition to cuts in pensions and public sector wages, remains deeply unpopular in Greece — and the political tension is growing.

Last week, the center-right New Democracy opposition party, which was in power when Greece went off the debt cliff, voted down the austerity measures, saying they offer too many tax increases and not enough stimulus, although the party says it supports the privatization plan and spending cuts.

Instead, the opposition is proposing tax cuts in order to increase growth and incentives to cut down on tax evasion — hoping that Greece’s foreign lenders will come around to the idea that raising taxes in a recession will curb growth.

“It’s not two competing programs. One will fail in the next few months,” Chrysanthos Lazarides, an economic adviser to the opposition leader Antonis Samaras, said in an interview at the New Democracy party headquarters on Tuesday.

Article source: http://www.nytimes.com/2011/07/06/business/global/06greece.html?partner=rss&emc=rss

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Greece Says Talks With Lenders End ‘Positively’

June 3, 2011 by Leave a Comment

ATHENS — After weeks of tense negotiations with its foreign creditors, Greece said Friday that a review of steps it had taken so far to meet the terms of its bailout had ended “positively,” marking a big step toward the release of a further installment of emergency funding.

In a statement, the Finance Ministry did not state explicitly whether the fifth transfer from its €110 billion, or $159 billion, package — this one valued at €12 billion — had been approved.

But it said that discussions with representatives of the European Commission, the European Central Bank and the International Monetary Fund “concluded today positively,” having covered additional measures needed to meet the 2011 deficit target, including privatizations and “structural reforms to restore growth and competitiveness.”

The ministry said the additional measures would be discussed by the government “in the coming days” before being voted on in Parliament.

In a separate statement, the commission, E.C.B. and I.M.F. said “the next tranche will become available, most likely, in early July.” But it added that more talks on financing would be held over the next few weeks, and the decision would still require approval by the I.M.F.’s executive board and the group of euro-zone finance ministers.

The European Union and I.M.F. pledged the emergency loans in May 2010 to rescue Greece from defaulting on its massive debt. In addition to deciding whether to release the latest tranche, they are also considering whether to extend additional loans of up to €60 billion to give Greece more breathing room while it struggles with a deep economic downturn.

Talks on those additional funds have been moving forward in recent weeks, although Greece’s lenders are demanding additional efforts to raise revenue and privatize state assets.

The Greek government is set to announce a new austerity plan that envisages raising €6.4 billion through spending cuts and tax increases this year, and raising another €50 billion by 2015 through privatizations.

The measures were expected to be outlined later Friday by the Greek prime minister, George Papandreou, who flew to Luxembourg for talks with Jean-Claude Juncker, the head of the euro group of finance ministers.

The announcement came amid mounting public opposition in Greece to an ongoing austerity drive and growing rifts within the ruling Socialist party, which has failed in two attempts to secure a broad political consensus for more austerity measures. E.U. and I.M.F. officials have pushed the government to get all political parties to sign on to the measures to ease the implementation.

The Socialist government has a comfortable, 6-seat majority in Parliament, but several Socialist lawmakers have suggested they might vote against the new austerity proposals. A letter sent to Mr. Papandreou on Thursday by 16 Socialist members of Parliament, framed the question being posed continually in the Greek media: “A year after signing the memorandum [last year’s agreement with Greece’s creditors] we are at a crucial juncture again. Why?”

Public opposition to the new measures has been evident. Thousands of Greeks, including many young people, filled the main square outside Parliament for a tenth day on Friday, calling on the government to revoke measures and for foreign creditors to “go home.” The protests have been small by Greek standards but are growing in intensity, and there have been sporadic incidents of stone-throwing at politicians.

Government officials have claimed that some of those incidents have been orchestrated by the Communist party and the radical left party Syriza, which are both represented in Parliament.

On Friday, members of the Communist-affiliated labor union PAME stormed the Finance Ministry offices, which are located opposite Parliament, and strung up a banner calling for “an organized overthrow” and strike action.

The country’s main labor union, GSEE, which represents around 2 million workers, has called a one-day strike for June 9 and is joining the civil servants’ union, which represents about 800,000 people, for a general strike on June 15.

Article source: http://www.nytimes.com/2011/06/04/business/global/04euro.html?partner=rss&emc=rss

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