“We’re telling financial markets: Look out, we’re not abandoning Greece.”
The briefing, coming the day Greece sold 5 billion euros ($6.8 billion) of bonds, underscores the balancing act facing European officials as they prod Greek Prime Minister George Papandreou to cut the biggest EU budget deficit without their committing funds, Bloomberg News reports.
Papandreou today begins meetings in Luxembourg, Berlin, Paris and Washington after protesters besieged the Greek Finance Ministry to denounce tax increases and spending cuts.
“We’re telling financial markets: Look out, we’re not abandoning Greece,” Luxembourg’s Jean-Claude Juncker, who heads the group of euro-area finance ministers, told Germany’s Deutschlandradio Friday.
He praised Greece’s “ambitious” deficit-reduction plan and said “I don’t assume outside financial help will become necessary.”
Should financial assistance become required, it would be tied to stringent conditions, Juergen Kroeger, who heads a European Commission department that oversees national economies, told the Berlin meeting, said the people, who spoke on condition of anonymity because the briefing of lawmakers, academics and executives in a parliamentary office building was private.
Kroeger gave no sign that aid was imminent, the people said. Kroeger was not immediately available for comment today. Bloomberg writes.
The briefing backs up comments made last week by German lawmakers who said the EU was developing a plan to offer Greece about 25 billion euros in emergency aid, even as German Chancellor Angela Merkel and other leaders say Greece has now done enough to rein in the deficit and reassure financial markets.
Merkel said today that Papandreou has “grabbed the bull by the horns” with 4.8 billion euros of additional deficit cuts this week. The Greek program is showing results and the bond issue yesterday “gives us cause for optimism,” Merkel told reporters in Munich.
Papandreou met Juncker in Luxembourg today and is scheduled to meet Merkel and brief reporters in Berlin at 6:30 p.m. local time.
Merkel said March 3 the meeting won’t be “about aid commitments” and her finance minister, Wolfgang Schaeuble, said Greece’s additional deficit-reduction measures are probably enough to convince investors to buy Greek debt.
The Greek government has pledged to reduce the deficit by 4 percentage points from 12.7 percent of gross domestic product.
Merkel’s spokesman, Ulrich Wilhelm, said today’s meeting “will not be about financial commitments for Greece’s handling of its debt crisis, but that it will of course be about political support.” Wilhelm said that political support “is an important signal to financial markets, which are monitoring the situation in Greece closely.”
In Greece, meantime, labor unions shut down transport today and state workers walked off the job in protest as parliament prepares to pass the austerity package.
Police scuffled with protesters and fired tear gas at demonstrators outside the parliament building during a protest march.
Ain’t Over Yet
The Greek government succeeded yesterday to issue ten-year government bonds for five billion euros.
Interest rates, however, ended as high as 6.25% which is twice what the German government pays for its loans.
“Although we should not exaggerate this interest, since Greece will pay as much as 6.25 percent interest rate, we feel nevertheless that the Greeks passed the first acid test,” macro economist Shakeb Syed at the Norwegian Handelsbanken writes in a note to clients.
Even if interest rates are high, it is good news that the Greek government is able to borrow significant amounts in the private market.
This reduces the risk for an imminent public debt crisis. Greece Stock Exchange rose yesterday on rumors that the bond auction would succeed.
But is Greece is on safe ground?
Not yet, because the country must borrow another 15 – 20 billion euros over the next two months.
European Markets Snap Shots
The latest labor market numbers from the U.S. made the European stocks rally at the end of the day. The euro and the price of gold took a nose dive.
German stock market/DAX:
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- Greeks Protest as Government Seeks E.U. Support (nytimes.com)
- Greece ‘Won’t Be Left Alone,’ Juncker Says, Boosting Papandreou (businessweek.com)
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