Greek Protesters Start Blowing Up Banks

A bomb exploded at a branch of HSBC bank in Athens on Sunday, damaging the entrance but causing no injuries, according to the Greek police. The situation in Greece is getting more dangerous every day.

“Images can be very powerful but also they can be misleading, a burning car does the rounds in a split second. There is no question that these are difficult measures and there’s no question there will be protests, but people realize that it is necessary to do even if they have to make sacrifices themselves .”

George Papandreou

Sunday’s bombing against the U.K.-based banking group was the protesters first reaction to the Socialist government announcement of new tough austerity measures in exchange for international aid to cope with the nation’s debt crisis.

“It appears a home-made bomb comprised of gas canisters and fuel caused small damage to the bank’s facade,” police officials says, according to Reuters.

Gas canister bomb attacks are common in Athens and are usually staged by leftist and anarchist groups against business and political targets.

Sunday’s bombing against the U.K.-based banking group was the first since the Socialist government announced tough new austerity measures in exchange for international aid to cope with a debt crisis.

Opinion polls clearly show that the public opposes the measures, and more than half of those asked in a recent survey said they would join the protests against them.

Biggest Bailout Ever

European finance ministers triggered a record 110 billion euro ($147 billion) bailout for debt-stricken Greece on Sunday after Athens committed itself to years of painful austerity.

After weeks of tough talk and procrastination due to fierce public opposition to handouts for the Greeks, German Chancellor Angela Merkel finally threw her full support behind the EU/IMF package, vowing to fight for parliamentary approval by Friday.

Euro zone ministers, meeting in emergency session, approved the three-year package of emergency loans and agreed the first funds would be released in time for Athens to make a big debt repayment to creditors on May 19.

In exchange for by far the largest bailout ever assembled for a country, Prime Minister George Papandreou announced further spending cuts and tax increases totaling 30 billion euros over three years on top of tough measures already taken.

“It is an unprecedented support package for an unprecedented effort by the Greek people,” a somber Papandreou, wearing a dark purple tie, the color used for funerals in Greece, told a televised cabinet meeting.

Merkel called the programme very ambitious and said she would work to achieve swift parliamentary approval of Berlin’s share — the biggest of any EU state at about 22 billion euros out of 80 billion — of the rescue loans.

“I’m going to work for the Greece programme and its passage,” she told reporters in Bonn, adding it was essential for the stability of the euro single currency.

U.S. President Barack Obama told Papandreou on Sunday he welcomes Greece’s “ambitious” reform program, the White House said. He also praised the “significant support” from the IMF and Euro zone members.

Euro zone leaders will hold a special summit on Friday to formally launch the rescue after obtaining parliamentary approval where necessary.

International Monetary Fund chief Dominique Strauss-Kahn forecast the IMF board would approve its 30 billion euro contribution to the package this week.

Greeks have already taken to the streets to demonstrate against the austerity drive and past governments have backed off from reforms to defuse often violent protests. But Papandreou, a Socialist with a strong personal approval rating, has insisted the country must face the bill for years of drift and graft.

“These sacrifices will give us breathing space and the time we need to make great changes,” he said.

“I want to tell Greeks very honestly that we have a big trial ahead of us.”


Stop Contagion

The first rescue of a member of the 16-nation euro zone aims to stem a debt crisis that has shaken financial markets, dented confidence in the euro and begun to spread to fellow euro zone weaklings Portugal and Spain.

Berlin’s hesitancy has fueled market panic.

The euro zone loans will carry an interest rate of about 5 percent — just half the rate demanded by markets last week to buy Greek debt, but nearly 2 percentage points more than the rate on Germany’s benchmark bonds.

European Commission and the International Monetary Fund will monitor Greece’s progress quarterly and loan disbursements will be tied to those reviews.

Telling angry Greeks to choose between the painful rescue or economic collapse, the government now aims to bring its towering budget deficit back to the EU limit by 2014, two years later than originally promised.

“These measures are tough and unfair,” says Stathis Anestis, a spokesman for private sector union GSEE. “They lead workers to misery and the country deeper into recession.”

Economists were more positive. “The aid package will help defuse the primary cause of concern for creditors which is the imminent risk of default,” says Lena Komileva, head of G7 market economics at Tullett Prebon. But she noted that there was still a question mark over political approval across Europe.

Underlining the challenge facing Merkel, German politicians voiced reluctance to approve the rescue. Social Democratic opposition leader Frank-Walter Steinmeier said his party would take a lot of convincing to support the bailout.

A conservative ally of Merkel demanded that Athens be put under stricter tutelage by sending a European Commissioner to oversee spending cuts and accounting. “We can’t give Greece any blank cheques,” said North Rhine-Westphalia state premier Juergen Ruettgers, who faces election defeat next Sunday.

The Greek rescue dwarfs the previous record bailout. South Korea — a country with a population nearly five times that of Greece — obtained a $58 billion rescue package from donors including the IMF during the Asian financial crisis in 1997.

Collapse Or Salvation

Citing a choice “between collapse or salvation,” Finance Minister George Papaconstantinou announced a three-year public sector pay freeze, further cuts in civil servants’ benefits, higher sales and fuel taxes, an increase in the effective retirement age and reductions in pensions.

Papaconstantinou said the deal would cover a large part of Greek borrowing needs for the next three years. In return Athens promised to slash its budget deficit to the EU limit of three percent of GDP by 2014 from 13.6 percent last year.

Papaconstantinou said Greece’s public debt would soar to nearly 150 percent of GDP — a higher peak than forecast earlier — but start falling from 2014. Both he and EU and IMF officials insisted there had been no talk of restructuring Greece’s debts.

Athens would return to commercial borrowing when “appropriate,” he added.

Economists say that if the rescue fails to calm markets, European countries could end up footing a bill of half a trillion euros ($650 billion) to save several other nations.

The following are comments by euro zone finance ministers and others as they met on Sunday to trigger a record bailout for debt-stricken Greece, as well as remarks from International Monetary Fund officials.

Here Are The Official Statements:

IMF MANAGING DIRECTOR DOMINIQUE STRAUSS-KAHN:

“The Greek government has designed an ambitious policy package to address the economic crisis facing the nation.”

“It is a multi-year programme which begins with substantial up-front efforts to correct Greece’s grave fiscal imbalances, make the economy more competitive and — over time — restore growth and jobs. We believe these efforts, along with the government’s firm commitment to implement them, will get the economy back on track and restore market confidence.”

“We believe these strong measures by the Greek government, along with the significant risks of spillover to other countries, merit an exceptional level of access to IMF resources equivalent to 3,200 percent of Greece’s quota in the Fund. This represents the largest access granted to a member country and it indicates the Fund’s high level of support for the programme and for Greece.”

“Our collective effort will contribute to the stability of the euro, will benefit all of Europe and will help to promote global financial stability and a secure recovery in the global economy.”

IMF MISSION CHIEF TO GREECE, POUL THOMSEN:

“The strategy of the programme is first and foremost a large front-loaded fiscal adjustment to try to quickly restore market confidence and to restore financial stability as the country goes through what will be a very difficult period.”

“We are not expecting GDP to get back, in nominal terms, … before 2014. This is a reality of doing this kind of programme in a country that cannot change its exchange rate. It will take time for the supply side to respond so this would suggest we’re looking at a multi-year effort of three to four years. It could take time for market confidence to return.”

“The objective is to quickly reduce the government deficit in order to return public debt to a sustainable path and improve market sentiment. The dilemma is of course that even with a very strong fiscal adjustment, the debt-to-GDP will rise from 115 percent in 2009 to about 150 percent in 2013, before it begins to drop. This will obviously be unsettling to markets, however, the sharp improvement in the non-interest balance that will turn positive in 2012, after a deficit of 8.6 percent in 2009, points to a rapid underlying improvement.”

“The stress-tests show that there could be a need to inject capital so we’re setting up a financial stability fund that will be funded from external financing, which will be operational in a couple of months.”

“As far as liquidity is concerned, the situation is getting tighter, in particular in the last couple of weeks, but we do think the existing facilities of the ECB and the emergency facilities of the Bank of Greece … should be adequate.”

“I am confident that in three years when this programme is over, when the headline deficit is down, when we are running primary surpluses of 6 to 7 percent, and debt has declined steadily, … markets will have confidence in Greece and there will be no need for an IMF programme.”

“This is one where there is clearly a need for very fundamental structural reform in the public sector but also to restore competitiveness. A loss of competitiveness of 25 percent since you joined the euro area, you have to do these reforms.”

“Yes, there are more reforms here than in many other programmes, but what we are focusing on here is macro-structural, particularly in the fiscal sector but also in the financial sector.”

GREEK FINANCE MINISTER GEORGE PAPACONSTANTINOU:

“Images can be very powerful but also they can be misleading, a burning car does the rounds in a split second. There is no question that these are difficult measures and there’s no question there will be protests, but people realize that it is necessary to do even if they have to make sacrifices themselves .”

EU MONETARY AFFAIRS COMMISSIONER OLLI REHN:

“Installments of financing will be made once the conditions of quarterly reviews have been met. It is very simple and very clear.”

“We have part of the programme earmarked — 10 billion euros — to a financial stability fund for a possible need to stabilize the banking sector in Greece.”

“That will depend on the … situation and this may not have to be used but we are earmarking 10 billion euros out of this 110 billion euros to finance this stability fund.”

“The first of these reviews will be conducted already before the summer break following the end of the second quarter of this year.”

EURO-GROUP CHAIRMAN JEAN-CLAUDE JUNCKER:

“The Euro-group has taken a decision … I’m sure that there’s no question of the European Council going back on that decision.”

“There’s nothing extraordinary in the fact that Mr (European Union President Herman) Van Rompuy has convened a European Council on the 7th of May.”

“The leaders of the euro area will inform each other about progress in parliamentary procedures and will discuss broadly views about … the euro area.”

GREEK FINANCE MINISTER GEORGE PAPACONSTANTINOU

“We are fully aware that this is a programme that is not going to be easy, it is not going to be easy on Greek citizens despite the efforts that have been made and will continue to be made to protect the weakest in society. We are absolutely convinced that this is a necessary programme. We will be submitting tomorrow to the Greek parliament draft legislation which will include the entire programme over the next three-year period as well as specific measures for reductions in wages in the public sector, in pensions and increasing direct taxation which will have an immediate effect.”

“It is an important day today. It is not an easy day but it is a day in which we have the commitment of the Greek government to do whatever it takes to bring the economy back in a sustainable band and the commitment of the euro zone members to safeguard the stability of the euro zone.”

IRISH FINANCE MINISTER BRIAN LENIHAN:

“Today’s decision will help safeguard the stability of the euro area as a whole and this stability will benefit all Euro zone member states. Over the past week almost all member states have seen the difficulties created by the present uncertainty.

“The Government is preparing national legislation to allow Ireland play its part in the provision of bilateral loans to Greece as part of this agreement. In order to access the bilaterals loans, the Greek Government must undertake an ambitious fiscal adjustment and they have also agreed to additional and important structural reforms.”

“Ireland’s share over the three year programme, which totals EUR110 billion and includes EUR80 billion from euro area countries, would be up to EUR1.3 billion.”

Source: Reuters

EUROPEAN  COMMISSION PRESIDENT JOSE MANUEL BARROSO:

“I welcome the agreement in Athens with the Greek authorities of a multi-annual program of fiscal consolidation and structural reform, jointly prepared by the European Commission together with the European Central Bank (ECB) and the International Monetary Fund.”

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