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Lenders Close to Agreement on Greek Aid

July 7, 2013 by Leave a Comment

International lenders are very close to wrapping up talks with Greece to unlock a further €8.1 billion in loans, though more efforts are required from Athens to overhaul its economy, the European Union’s top economic official said Sunday, a day before euro zone finance ministers meet to decide on the aid.

Athens has been in talks with inspectors from the Union, the European Central Bank and the International Monetary Fund, otherwise known as the troika, since last Monday to discuss progress on overhauls agreed as part of its €240 billion, or $308 billion, bailout.

“We are very close to a staff-level agreement,” Olli Rehn, the E.U. commissioner for economic and monetary affairs, said, referring to the talks between international lenders and Greek officials.

“The final decision is for tomorrow,” he said. “The ball is in the Greek court, and it depends on whether Greece is able to deliver the remaining elements of the milestones that have been agreed.”

Greece needs the funds from the €8.1 billion tranche being reviewed to buy back €2.2 billion of its bonds due in August.

Bailed out twice by its foreign lenders, Greece relies on foreign aid to stay afloat. Failure to successfully conclude its bailout review, and unlock the funds, could push the country close to bankruptcy once again and possibly reignite the euro zone crisis.

But international officials seemed upbeat on Sunday.

“We made very good progress,” Poul M. Thomsen, head of the I.M.F.’s mission to Greece, told a news conference, adding that he hoped talks would be concluded early Monday before the Eurogroup meeting of finance ministers.

The Greek finance minister, Yannis Stournaras, also said he was optimistic that a deal would come together by Monday morning. Troika officials were to leave Athens on Sunday but were expected remain in contact with Greek officials to nail down the final details.

The €8.1 billion installment is one of the last big cash injections that Greece will receive as part of the €240 billion rescue package, which expires at the end of 2014.

Mr. Rehn reiterated that aid for Greece could be split into installments. Lenders have become increasingly frustrated with Greece’s slow progress on shrinking the civil service and making it more efficient and less corrupt.

Talks with the troika stumbled last week over a missed June deadline to put 12,500 state workers into a “mobility” plan under which they would be transferred or laid off within a year. But an agreement over the issue was reached on Saturday, with the troika reportedly giving Greece a few more months to push through the plan.

Article source: http://www.nytimes.com/2013/07/08/business/global/lenders-close-to-agreement-on-greek-aid.html?partner=rss&emc=rss

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Closing of State Broadcaster Leaves Greece in Turmoil

June 12, 2013 by Leave a Comment

Thousands of protesters, including many of the 2,900 workers laid off from the Hellenic Broadcasting Corporation, known as ERT, rallied outside the broadcaster’s headquarters north of Athens in the early hours of Wednesday as ERT’s symphony orchestra played for them. The crowds dispersed and reassembled later in the morning.

Private television channels suspended their news coverage as of 6 a.m. Wednesday in solidarity with ERT employees, while newspaper headlines conveyed the shock felt by many Greeks at the closing of a 75-year-old institution.

The country’s two main labor unions, Gsee and Adedy, called a 24-hour strike for Thursday to protest the government’s “provocative” decision to close ERT. Staff members at daily newspapers also plan to walk out on Thursday in solidarity with ERT employees.

In defiance of the government’s decision, ERT employees continued to broadcast on Wednesday from the defunct organization’s offices in Athens and from the second-largest city in Greece, Salonika, via digital television and the Internet.

The surprise decision on Tuesday to shut down ERT came a day after representatives of the troika — the European Commission, European Central Bank and International Monetary Fund — returned to Athens for new talks on the progress of the country’s efforts to reform its economy. Greece’s pledge to lay off public workers was high on the agenda.

The move to close the broadcaster came a day after Gazprom, the Russian state-owned energy company, failed to submit a bid to buy Greece’s national gas company, a deal that Athens had hoped was done after a series of meetings between Prime Minister Antonis Samaras and the Gazprom chief executive, Aleksei B. Miller.

In another blow, MSCI, which compiles world stock indexes, downgraded Greece to the status of emerging market from developed market on Tuesday, citing the country’s failure to meet criteria for market accessibility, like practices regarding securities borrowing and lending facilities.

The timing of the decision on ERT was widely seen by political analysts as an attempt by Mr. Samaras to show boldness and decisiveness after accusations of foot-dragging on economic changes and the Gazprom snub. But his move further alienated his two coalition partners, the Socialist party Pasok and the Democratic Left, who increasingly complain of being sidelined in decision-making.

On Mr. Samaras’s orders, the mass media ministry on Wednesday quickly released a bill outlining the framework for a new, leaner replacement for ERT. The government spokesman, Simos Kedikoglu, said Wednesday that the new entity would be set up over the summer. It remained unclear how many people it would employ.

Pasok and the Democratic Left immediately responded with a joint proposal for the decision on ERT to be revoked. It was the latest in a string of internal disputes that has tested the stability of the fragile coalition, which was cobbled together last June to prevent a messy default and a Greek exit from the euro currency union.

Some officials suggested that coalition would hang together, at least for now.

“We don’t want to bring down the government,” said Andreas Papadopoulos, an official for the Democratic Left. “But this is a mistake by New Democracy and Mr. Samaras and must be corrected. With such actions they are testing the limits of democracy.”

Pasok called an emergency session of its political council for Wednesday afternoon and was expected to press Mr. Samaras for a meeting of coalition leaders.

On the streets of Athens, the reaction Wednesday was a mix of shock, anger and nostalgia.

“This is worse than the junta,” said Thomas Dedes, a 67-year-old retiree, referring to the military dictatorship that ruled Greece in the late 1960s and early 1970s. “What’s next? Tanks in front of Parliament?” he said.

“You can’t just shut down state television,” said Irini Milaki, a 50-year-old schoolteacher. “What kind of democracy are we? We don’t deserve to be European.”

Others expressed disbelief at the speed of the move on ERT. “It takes longer to shut down a taverna,” said Costas Tasopoulos, a 45-year-old restaurant manager. The government, he said, “might drag their feet on other things, but when it comes to cutting jobs and salaries they move like lightning.”

Article source: http://www.nytimes.com/2013/06/13/world/europe/closing-of-state-broadcaster-leaves-greece-in-turmoil.html?partner=rss&emc=rss

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Inside Europe: Troika Has a Patchy Record on Bailouts

June 10, 2013 by Leave a Comment

PARIS — If the troika that handles bailouts of distressed euro zone countries were a soccer team, it would probably be looking for a new manager after achieving a track record of one win, one loss and one draw.

The uneasy trio — the European Commission, the International Monetary Fund and the European Central Bank — was assembled in haste in March 2010 after Greece’s public debt and deficit exploded and it was about to lose access to market funding.

Last week’s “mea culpa” report from the I.M.F. about the failures of the Greek program blew the lid off the fiction that the three institutions saw eye-to-eye on the rescue packages they designed and are enforcing in Greece, Ireland, Portugal and now Cyprus. Behind closed doors, they clashed over whether Greece should restructure its debt, forcing investors to take losses, and whether Ireland should make bondholders in its shattered banks share the cost of a financial rescue.

They still differ over whether European governments should write off some loans to Athens to make its debt sustainable in the long term, an idea that is politically explosive before a German general election in September.

The public airing of such differences raises the question of whether the troika has reached the end of the road. The I.M.F. says it lowered its standards to support a flawed program for Greece; the European Commission says it “fundamentally disagrees” with the I.M.F.’s view that Greek debt should have been written off sooner; and the E.C.B. says the I.M.F. is applying misleading hindsight.

The Europeans contend that in the market panic of 2010, before the euro zone had begun to build a financial firewall, letting Greece default or making it restructure its debt could have caused massive contagion to other countries and perhaps swept away the euro itself.

“It would have been Europe’s Lehman moment,” said the Europe’s economic and monetary affairs commissioner, Olli Rehn, referring to the 2008 collapse of Lehman Brothers that sparked a global financial crisis. “I don’t recall the I.M.F.’s managing director, Dominique Strauss-Kahn, proposing early debt restructuring, but I do recall that Christine Lagarde was opposed to it.”

Ms. Lagarde was French finance minister at the time and replaced Mr. Strauss-Kahn as head of the I.M.F. in 2011.

The most damaging suspicion raised by the I.M.F. study of the Greek program is that the troika made overoptimistic growth forecasts and massaged the debt numbers because euro zone political leaders had exerted undue influence on the process.

Wrapped in the forensic jargon of financial analysis, the I.M.F. experts say European leaders made Greece’s economic crisis worse by delaying an inevitable debt write-off, buying time for their own banks to cut their losses at taxpayers’ expense.

“The troika is a unique set-up which has institutionalized political influence in I.M.F. decision-taking,” said Ousmène Mandeng, a former I.M.F. official. “Decisions were perceived to be taken in Berlin and Brussels rather than by the I.M.F. board. The I.M.F. should never again be a junior partner in this way.”

Mr. Mandeng argues that the fund should either pull out of the troika or take sole control of the rescue programs.

The E.C.B. president at the time, Jean-Claude Trichet, initially opposed bringing the I.M.F. on board, arguing that Europe should be able to sort out its own problems. He also rejected debt restructuring and making bank bondholders share losses, saying it would ruin the euro area’s standing in financial markets. Germany and its allies in Northern Europe insisted on I.M.F. involvement because they feared the commission would be too soft on indebted member states and too willing to commit taxpayers’ money.

But the I.M.F. is not the only body to give rise to misgivings. Some E.C.B. stakeholders, notably in Germany, are worried about potential conflicts of interest if the central bank stays in the troika while it is backstopping euro zone government debt through its bond-buying program and about to take over supervision of banks that lend to troubled sovereigns.

An E.C.B. executive board member, Jörg Asmussen, told the European Parliament that once the current crisis is over, the troika should be replaced by the euro zone’s rescue fund and the European Commission. But not now.

Many independent economic experts argued from the outset that Greece would never be able to repay its debt mountain and questioned the troika’s rosy forecasts for the Greek economy. The initial Greek program projected that gross domestic product would contract by just 3.5 percent between 2009 and 2013. In fact, it crashed by 22 percent. Troika officials repeatedly increased the amount Greece was supposed to raise by privatizing state assets, even as its economy crumbled and investors fled.

The biggest errors were in predicting unemployment. The troika foresaw a peak jobless level of 14.8 percent this year. The real figure is 27 percent.

Growth forecasts for Portugal, where the outcome of an E.U.-I.M.F. adjustment program remains uncertain, were also overoptimistic, though not to the same extent. Even in Ireland, the one “success” which returned to growth and expects to get back to market funding this year, the troika underestimated job losses and the related social damage.

Now I.M.F. members in Latin America and Asia, which endured harsh lending terms in the 1980s and 1990s, are loath to pour more money into one of the world’s richest regions.

“Operationally and financially, the I.M.F. has become much more involved in Europe than its global shareholders deem sustainable,” said Jean Pisani-Ferry, the departing director of the Bruegel economic study group in Brussels.

A person at the I.M.F., speaking on condition of anonymity because he is still involved with the bailout programs, said the real problem with the troika was that no one was in charge.

“It’s more like a soccer team with no manager and no clear definition of who plays where on the field,” he said.

Paul Taylor is a Reuters correspondent.

Article source: http://www.nytimes.com/2013/06/11/business/global/troika-has-a-patchy-record-on-bailouts.html?partner=rss&emc=rss

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Policy ‘Troika’ for Europe Financial Woes at Odds

June 7, 2013 by Leave a Comment

Throughout much of Europe’s seemingly unending economic crisis, Mr. Rehn and the I.M.F. chief have been an inseparable part of a curious policy-making ménage à trois known as the “troika,” a trio that also includes the European Central Bank.

The tensions at the heart of this intimate but unwieldy arrangement, however, have now burst into the open with an unusual bout of finger-pointing over policies that have pushed parts of Europe into an economic slump more severe than the Great Depression and left the Continent as a whole far short of even Japan’s anemic recovery.

The blame game, initiated by a highly critical internal I.M.F. report released this week in Washington, has put a spotlight on a question that has lurked in the shadows throughout the troika’s efforts to get a grip on Europe’s economic mess: Is it time for a divorce?

Speaking Friday at an economic conference in his home country of Finland, Mr. Rehn, the usually phlegmatic commissioner of economic and monetary affairs, sounded like a put-upon spouse in a messy breakup. “I don’t think it’s fair and just for the I.M.F. to wash its hands and throw dirty water on the Europeans,” he said.

He was responding to assertions by the I.M.F. that the European Commission, the union’s executive arm, had blocked proposals back in 2010 to make investors share more of the pain by writing down Greece’s debt and, more generally, had neglected the importance of structural reforms to lift Europe’s sluggish economy.

Simon O’Connor, Mr. Rehn’s spokesman, said the report had made some valid points, but he derided as “plainly wrong and unfounded” a claim that the commission had not done enough to promote growth through reform. On this issue and events in Greece, Mr. O’Connor said, “We fundamentally disagree.”

Left-wing politicians who have long denounced the troika as an alien and unaccountable force are muttering “told you so” and complaining that putting policy in the hands of a triumvirate of unelected institutions could never work.

“The troika is constructed in such a way that it is untouchable, and that is the end of democracy,” said Udo Bullmann, a Socialist member of the European Parliament’s Economic and Monetary Affairs Committee from Germany and a strong critic of austerity measures that have formed the core of the troika’s policy prescription for Europe’s ailing economies.

“What is this troika?” asked Mr. Bullmann. “It has no address and no telephone number. Who do you talk to?” He said the troika was designed to diffuse and thus dodge responsibility. “Decisions are made in a nontransparent and nondemocratic way so that nobody has to take the blame,” he said.

Charles H. Dallara, a former United States Treasury Department official who represented the banking industry in negotiations with the troika over Greece, said that the I.M.F. and the European Commission were never as united as they often seemed and were bound to come to blows at some point.

“It is very difficult to have three cooks in the kitchen all the time. That is just life,” said Mr. Dallara, who now works for a private equity company based in Switzerland. “You need one institution driving negotiations. You don’t need three.”

The idea of yoking three together to address Europe’s troubles dates back four years to when it became clear that Greece, the weakest member of the 17-nation zone that uses the euro, would need a bailout to stave off bankruptcy. Northern European countries, particularly Germany, demanded that the I.M.F. play a role in order to share both the cost of a bailout and the blame for imposing tough terms.

Jack Ewing contributed reporting from Frankfurt, and James Kanter from Brussels.

Article source: http://www.nytimes.com/2013/06/08/world/europe/policy-troika-for-europe-financial-crisis-has-splits.html?partner=rss&emc=rss

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Political Economy: Quitting the Euro Wouldn’t Be a Good Choice for Cyprus

April 7, 2013 by Leave a Comment

But it would be foolish to forget about Cyprus. Despite the $13 billion bailout, the small Mediterranean island is edging toward a euro exit. Quitting the single currency would devastate wealth, fuel inflation, lead to default and leave Cyprus friendless in a troubled neighborhood. Even so, the longer capital controls continue, the louder will grow the voices that call for bringing back the Cypriot pound.

The president, Nicos Anastasiades, is against Cyprus’s leaving the euro. But the main opposition, the Communist Party, wants to pull out. A smaller opposition group wants to stay in the euro but kick out the so-called troika of creditors — the European Commission, the European Central Bank and the International Monetary Fund. The country’s influential archbishop is also critical of the troika.

The president can hold the line for now. After all, he has just been elected and the Constitution gives him huge power. What is more, there are strong arguments for staying inside the single currency — not the least of which is that otherwise, Cyprus would lose the €10 billion (or nearly 60 percent of its gross domestic product) in bailout money.

If Nicosia brought back the Cypriot pound, it would plummet in value. Nobody knows how much, but economists guess it might be as much as 50 percent. Cypriots are complaining about the large losses suffered by big depositors at their two largest banks, Bank of Cyprus and Laiki. Such a devaluation would savage the wealth of all other depositors.

Meanwhile, devaluation would fuel inflation. Cyprus is a small, open economy. All the oil is imported. More than 80 percent of the textiles, chemicals, electronics, machinery and automotive vehicles are imported, too, according to Alexander Apostolides, a lecturer in economics at the European University Cyprus.

Cyprus also relies on low-cost immigrant labor in its agricultural and tourism industries. After a devaluation, their cost in local currency would rise. All this would mean the erosion of any gain in competitiveness.

The island’s economy would suffer a further shock because it is running a current account deficit of about 5 percent of G.D.P. Given that Cyprus has minimal hard currency reserves, this deficit would have to vanish overnight. Imports would slump. But so would domestic production, given its reliance on imports.

In such a scenario, Nicosia would not be able to avoid defaulting on its debts. Following a 50 percent devaluation, these would be double their current value when expressed in local currency. The debts come in two forms: the government’s own €15 billion in borrowings; and the central bank’s €10 billion in emergency liquidity assistance to the banks.

Default might seem to be an attractive option because Nicosia would suddenly shrug off a vast debt load. But it would not be that simple. The government would face many lawsuits. And if the central bank defaulted on its provision of the emergency assistance, the E.C.B. would take the hit. The euro zone would not be happy and would, at a minimum, insist on some sort of staged repayment plan.

Cyprus could, of course, refuse to pay point blank. But it is not Argentina. Its small size makes it vulnerable to being pushed around. If it tried to play hardball with its euro zone partners, it would probably find them playing hardball with it. They might even find a way to kick Cyprus out of the European Union.

Exit from the Union would be another blow for Cyprus. Its best trading opportunities are within the Union. Most of the rest of the neighborhood — like Syria and Egypt — is not in great shape. And Turkey is out of bounds until and unless some way can be found to resolve the dispute between Nicosia and Ankara over the latter’s occupation of the northern part of the island.

Cyprus would also struggle to exploit its offshore natural gas reserves if it quit the European Union. Turkey, which is already trying to stop that development, would find it easier, if Nicosia were friendless.

Apart from all this, the country would have to decide how to run monetary policy.

A responsible government would want to contain inflation by either linking the Cypriot pound to another currency, like the British pound, or running a tight but independent monetary policy. In either case, Nicosia would have to keep interest rates high and curb its budget deficit. Given its small foreign exchange reserves, it might also need to maintain capital controls.

Such an austerity program would be worse than that demanded by the troika. It would then be hard to avoid the temptation to print money. But that way lies hyperinflation.

So quitting the euro would not be a good choice. But staying is not a great one either. G.D.P. could plunge about 20 percent over the next two years, according to the latest guesses. And the longer capital controls are in place, the more the Cypriot people will feel they are not in the single currency zone anyway — as a euro in Cyprus is not equal to one in the rest of the world.

The troika should help lift the controls as soon as possible. Otherwise, Cyprus may well quit the euro and, small though it is, that could destabilize the zone.

Hugo Dixon is editor at large of Reuters News.

Article source: http://www.nytimes.com/2013/04/08/business/global/quitting-the-euro-wouldnt-be-a-good-choice-for-cyprus.html?partner=rss&emc=rss

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Irish Legacy of Leniency on Mortgages Nears an End

March 29, 2013 by Leave a Comment

“I still deal with my lender, and they threaten with legal action now and again,” said Mr. Gilroy, whose electrical business failed in the crisis. With no income since, he has no hope of paying off the €310,000, or $398,000, loan on the four-bedroom house in Navan, north of Dublin, that he shares with his wife and three children.

The lender is “only threatening by letter at the minute,” said Mr. Gilroy, who is betting the odds are in his favor, for the time being at least. Although there are more than 143,000 delinquent home mortgages in Ireland, foreclosures have been so politically and legally difficult that, in the last three months of last year, they numbered 38.

That could change.

Under pressure from the international lenders who agreed to a €85 billion, or about $109 billion, bailout of the Irish economy in 2010, the law is being amended to overturn a legal ruling that has been restricting banks’ right to repossess property. As Ireland’s fellow euro zone member Cyprus may be about to learn, bailouts come with strings that can bind for years to come.

Besides pushing for changes to property-repossession law, Ireland’s creditors, collectively known as the troika — the European Commission, the European Central Bank and the International Monetary Fund — has also prompted the government to introduce the country’s first property tax in more than 15 years, a measure intended to raise €500 million a year.

Unlike Cyprus, where wealthier depositors are being forced to help pay for ruined banks, the Irish government picked up the tab for its broken lenders before it, too, had to seek help.

More than two years after the bailout, officials say that the dead weight of debt, mostly in bad property loans, is still hanging over the economy, stifling confidence and suffocating recovery. New rules that take affect later this year are designed to help troubled borrowers and cut their debt loads. But critics fear that the latest tightening could nonetheless cause thousands of Irish households to lose their homes and hamper the broader recovery efforts.

If people cannot make their mortgage payments, it is unlikely that many will suddenly be able to pay property tax bills. Mr. Gilroy has refused to open his assessment but thinks it would demand an additional €300 a year.

No one anywhere likes to lose their home, of course. But repossessions strike an especially resonant chord in Ireland, which has an acute memory of forced evictions under British rule.

“Being a country with a long history of colonial oppression, people being evicted touches a bit of a raw nerve with a lot of people,” said Paul Joyce, senior policy analyst at Free Legal Advice Centers, a rights organization that campaigns on debt and other issues. “The notion of people being put out of their homes is not one that sits too easily in Ireland.”

Mr. Gilroy, who represented a new party, Direct Democracy Ireland, in a parliamentary election Thursday — finishing fourth — came to prominence in part through You Tube clips of verbal confrontations with officials trying to seize properties.

He admits he was naïve in not checking the repayment terms on his mortgage, which he sought in a hurry to buy the house he coveted in 2008, a time when newly listed homes were often being snapped up within days. But his borrowing was not reckless, he said, adding that he had accepted a loan with high repayments on the basis that he could switch after six months, something he discovered too late was impossible.

“After three and a half years of not missing one payment, I was eventually broke, the business was failing, house prices were dropping,” said Mr. Gilroy. He said he and others would need 70 to 80 percent knocked off their mortgages to make them remotely affordable and reflective of current property prices.

He blames his plight on “criminal activity by the bankers” and “stupid” policies by the government which bailed out the banks at the taxpayers’ expense. Many other Irish share his anger, Mr. Gilroy contends.

Bankers see things a bit differently.

Article source: http://www.nytimes.com/2013/03/30/business/global/irish-legacy-of-leniency-on-mortgages-nears-an-end.html?partner=rss&emc=rss

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Head of Cyprus’s Biggest Bank Resigns

March 27, 2013 by Leave a Comment

Antreas Artemis complained that authorities rode roughshod over him and his board of directors by moving unilaterally to sell off units of the bank in Greece and planning to hit big depositors to pay for losses.

The changes at the Bank of Cyprus are part of the latest bailout deal negotiated between Cypriot officials and the so-called troika of international lenders: the European Commission, the European Central Bank, and the International Monetary Fund.

Mr. Artemis’s resignation, while not wholly unexpected following the controversial decision by international lenders to impose significant losses on the bank’s larger depositors, still caught the market by surprise and was a further reminder of how volatile and uncertain Cyprus’s financial system has become in recent days.

Bankers say that the fact that the board of the country’s largest bank had been left largely in the dark as its future was being discussed in Brussels and that an outside administrator had recently been named to oversee the bank in the coming months were factors likely to have contributed to his decision.

Despite promises since last week that the country’s banks would reopen Tuesday, the government late Monday ordered all of them, including the Bank of Cyprus and Cyprus Popular Bank — the nation’s largest financial institutions, with most of the accounts on the island — to stay shut through at least Thursday. The extended bank closing is to reduce the risk of a bank run by nervous depositors. Automated cash withdrawals will be limited to €100 a day.

On Tuesday, the Cypriot central bank said it had appointed Dinos Christofides, a well-known local businessman, to act as special administrator for Bank of Cyprus. Mr. Christofides, who operates a business advisory service in Nicosia, has long experience in auditing and advising major local and international companies.

Administrators are often assigned by governments, creditors or courts to replace management at troubled institutions, with a goal to restoring their finances.

In a statement, the bank said the resignation had not been accepted and “will only apply if not withdrawn within one week,” Reuters reported.

The island’s faltering banks suffered a new indignity on Tuesday, as Fitch Ratings said it was cutting its credit grades on Cypriot banks because of the losses imposed by the bailout deal on senior creditors.

Fitch said it was cutting its rating on Cyprus Popular Bank, known as Laiki Bank, to “default.”

Fitch also cut its rating on Bank of Cyprus to “restricted default,” a grade Fitch said means the bank has experienced a payment default on a bond, loan or other material obligation but has “not entered into liquidation or ceased operating.”

Laiki’s soured assets are being hived off into a so-called bad bank. Its good assets are being transferred to Bank of Cyprus, which is being recapitalized by converting uninsured depositors’ claims into equity. Fitch said it expects the losses on Bank of Cyprus’s uninsured deposits “to be material.”

Piraeus Bank of Greece said Tuesday it had acquired the Greek operations of three Cypriot lenders — Bank of Cyprus, Laiki Bank and Hellenic Bank — for €524 million.

The Greek branches of the Cypriot banks will reopen on Wednesday, Piraeus Bank said, and deposits “will not be subject to any emergency contribution or ‘haircut’ decided on for Cyprus.”

The acquisition, proposed last Friday by Greek authorities, “secures the stability of the Greek banking system, helps Cyprus tackle its crisis and protects depositors, customers and staff” of the banks, Piraeus Bank said.

The upbeat statement did not reflect the rueful mood in Greece, where newspaper headlines continued to lash out at Germany and Northern Europe for their tough stance in negotiations and lamented the possible implications for Greece, which is bracing for the return of troika inspectors next week.

Article source: http://www.nytimes.com/2013/03/27/business/global/europe-officials-seek-to-contain-cyprus-damage.html?partner=rss&emc=rss

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Greece Agrees to Borrow to Pay for Debt Buyback

November 29, 2012 by Leave a Comment

The finance minister, Yannis Stournaras, said the strategy of buying back debt from bondholders at a discount needed to succeed as a matter of “patriotic duty.”

Mr. Stournaras did not say outright that the buyback was a firm requirement for the release of 34.4 billion euros, or $44.5 billion, in bailout money next month, though the International Monetary Fund, one of Greece’s troika of creditors, signaled as much this week. The Greek debt management agency is to disclose details of the buyback next week.

Mr. Stournaras said that if the program failed to attract sufficient interest from the banks and insurers that hold the government’s debt, officials had drawn up a “Plan B.” He refused to elaborate.

The loans needed to carry out the buyback would come on top of the money that European officials and the I.M.F. committed to release after marathon talks in Brussels this week.

The troika has calculated that if successful, the debt buyback, together with other means of debt relief, could help Greece reduce its debt to 124 percent of gross domestic product in 2020 and even further after that, from about 175 percent now.

But a number of hurdles remain that could mean delays in reducing Greece’s debt. For one, Athens will also have to persuade bondholders to sell back their debt at a price that is attractive to the government. Bondholders will hold out for as much as they can get.

In addition, some of those bondholders are beleaguered Greek banks. The government bonds they hold count as bank capital and pay a high rate of interest, reflecting the risk attached to the debt. Writing down the value of the bonds, and forgoing that capital and income, will eventually leave the banks even worse off than they are now. That may require the troika to send even more aid to Greece in the future to recapitalize the banks, analysts say.

As it is, nearly 85 percent of the coming installment of bailout aid has been set aside to shore up Greek banks, which have virtually stopped lending.

Since Greece appealed for foreign support to avoid default in April 2010, the troika — the European Commission, the European Central Bank and the I.M.F. — have committed to two loan programs worth 240 billion euros. In exchange, three increasingly weak governments in Athens have imposed a raft of austerity measures that have crippled Greek households.

European and I.M.F. officials on Tuesday agreed to release about 44 billion euros in aid. Of that, 34.4 billion euros is to be disbursed by Dec. 13. The remaining 9.3 billion euros is to be released in the first quarter of next year on the condition that Greece meets the troika’s targets for adopting austerity measures and fiscal and economic reforms.

Mr. Stournaras said the agreement in Brussels “creates the conditions to keep us in the euro zone and the opportunity to emerge from the vicious cycle of recession and indebtedness.” But he said there was no cause for celebration. “Now the hard part begins,” he said.

Niki Kitsantonis reported from Athens and Liz Alderman from Paris.

Article source: http://www.nytimes.com/2012/11/29/business/global/greece-struggles-again-to-come-up-with-funds.html?partner=rss&emc=rss

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Economist Lucas Papademos Named Prime Minister of Greece

November 11, 2011 by Leave a Comment

The announcement came after four days of often chaotic negotiations that put the feuding among Greece’s political parties on full display.

Mr. Papademos, who has a low-key, avuncular manner, emerged from the presidential office building shortly after the statement about his new post was released at midday and spoke briefly with reporters, striking an optimistic note.

“The course will not be easy,” he said. “But the problems, I’m convinced, will be solved. They will be solved faster, with a smaller cost and in an efficient way, if there is unity, agreement and prudence.”

Mr. Papademos has only a few weeks to persuade Greece’s creditors in the so-called troika — the European Union, the International Monetary Fund and the European Central Bank — to release its next block of aid, $11 billion, before the country runs out of money. Then he must begin fulfilling the painful terms of an even larger loan.

He will have to move swiftly to reassure the European leaders there will be no repeat of the shock they suffered in October, when the former prime minister, George A. Papandreou, after negotiating a new $177 billion loan, decided without warning to submit the bailout package to a referendum. The move infuriated the Europeans, who had concocted the Greek bailout as part of a painstakingly negotiated broader effort to stabilize the euro. It also started the clock on the end of Mr. Papandreou’s tenure.

Mr. Papademos will have to deal with 2011 budget shortfalls and the passage of a 2012 budget that is expected to call for another round of austerity measures in a climate of growing social unrest. He will also have to start what are expected to be difficult negotiations with private sector banks that have agreed, in principle, to write off 50 percent of the face value of their Greek bond holdings as part of the rescue plan.

As if to underscore the problems, the national statistics authority reported on Thursday that unemployment had jumped to a record high 18.4 percent in August, a month when the tourist season normally lowers the rate, from 16.5 percent in July.

Mr. Papademos almost did not get the job. After Mr. Papandreou agreed on Sunday to step aside once a new coalition government had been formed, the parties could not seem to stop fighting long enough to settle on a candidate. With new elections expected early next year, all sides were maneuvering for strategic advantages. On Wednesday evening, Mr. Papandreou went on television to give his farewell speech as prime minister and was expected to announce a different successor.

But some 50 members of his party, and members of the opposition as well, pressed for Mr. Papademos, seen as an outsider to the old-boy political networks — a technocrat, perhaps able to take Greece on a new path. But it was not an easy sell. Some analysts here have said that the political parties were reluctant to embrace him because he would be an unknown, and perhaps a rival, at election time.

Only after another five hours of negotiations on Thursday morning did the president’s office issue a written statement confirming that Mr. Papademos would take on the task of trying to bring Greece’s economy back from the brink. It was unclear on Thursday night what his cabinet might look like.

News reports earlier this week said that Mr. Papademos had also set certain conditions before he was willing to take the post that had added to some of the reluctance to embrace him. The reports said he wanted a term of at least six months; earlier, the major political parties had agreed to new elections in just 100 days.

Other reports said that Mr. Papademos was insisting that members of the main opposition New Democracy party play a significant role in the unity government. It was widely reported that the opposition, headed by Antonis Samaras, had resisted participating, not wanting to be linked to deeply unpopular reforms with an election around the corner.

But standing outside the presidential palace, Mr. Papademos said he had not made any demands before accepting the job. He also said the new unity government would be “transitional,” and its priority would be to make sure that Greece stayed in the euro zone. “I am convinced that Greece’s continued participation in the euro zone is a guarantee for the country’s stability and future prosperity,” he said.

Whether he will succeed remains an open question. But some analysts said they considered his appointment to be Greece’s best shot.

Niki Kitsantonis and Dimitris Bounias contributed reporting.

Article source: http://www.nytimes.com/2011/11/11/world/europe/greek-leaders-resume-talks-on-interim-government.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Greek Rescue Talks End With Progress Reported

September 21, 2011 by Leave a Comment

Investors had hoped that two days of talks between Greece and the so-called troika — the International Monetary Fund, the European Central Bank and the European Commission — would lead to a deal allowing the release of the latest installment of loans, which the country needs by mid-October to avoid running out of cash to pay its bills.

It now seems the question of how best to help European economies in crisis will preoccupy finance ministers of the Group of 20 nations, who are due to meet Friday in Washington. There is a sharp divide between those led by Germany, who believe that deep cuts are necessary to bring the debt crisis under control, and those who believe that it is more important to stimulate growth in sagging economies, which will make the debt easier to repay in the long run.

The Greek Finance Ministry issued a statement late Tuesday saying that the second day of conference calls between the finance minister, Evangelos Venizelos, and representatives of the country’s foreign creditors had yielded “satisfactory progress” and that inspectors from the European Commission, European Central Bank and I.M.F. would return to Athens at the beginning of next week.

“Teams of technical experts will continue analyzing data not just to close the budget for 2011 and prepare the budget for 2012 but also for the years 2013 and 2014, that is for the entire duration of the midterm economic program,” the statement said, referring to a raft of austerity measures voted through Greece’s Parliament in June during violent public protests.

The Greek press published a list of 15 austerity measures that the troika was said to be demanding of the Socialist government. They included laying off an additional 20,000 state workers, cutting or freezing state salaries and pensions, increasing the heating-oil tax, shutting down money-losing state organizations, cutting health spending and speeding up privatizations.

Meanwhile, the Italian government reacted angrily Tuesday to the downgrade of its debt by the credit rating agency Standard Poor’s, describing the move as out of touch with reality.

Late Monday, S. P. cut Italy’s rating by one notch to A from A+, keeping it an investment grade but citing the country’s weakening economic growth prospects and higher-than-expected levels of government debt.

The agency said Italy’s fragile governing coalition and policy differences in Parliament would continue to limit the government’s ability to respond decisively to economic headwinds. It also cast doubt on whether the projected 60 billion euros, or $82 billion, in fiscal savings would be realized because growth prospects are weakening, the budgetary savings rely on revenue increases, and market interest rates are anticipated to rise.

Italy is the third-largest economy in the euro zone, behind Germany and France, and is considered to be too big to save should it run into the same kind of trouble that gripped Greece, Portugal and Ireland.

Although Italy’s budget deficit is relatively low, the big concern among investors is that Italy, whose debts stand at 120 percent of its gross domestic product, will find it increasingly costly to borrow.

Prime Minister Silvio Berlusconi’s office issued a statement Tuesday noting that his government had a solid majority in Parliament. It said the government was preparing steps to lift growth and recently passed measures to control public finances through tax increases and spending cuts.

“The evaluations of Standard Poor’s seem dictated more by behind-the-scenes reports in newspapers than reality and seems influenced by political considerations,” the statement said.

The yield on Italian 10-year bonds rose slightly Tuesday. At nearly 5.7 percent, Italy’s borrowing costs are more than three times what Germany, the euro zone anchor, pays.

Niki Kitsantonis, Elisabetta Povoledo and Nicholas Kulish contributed reporting.

Article source: http://www.nytimes.com/2011/09/21/business/global/greek-rescue-talks-end-with-progress-reported.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,