Greek political leaders announced agreement on austerity measures, clearing the way for a deal to cut the nation’s debt and win its second rescue in two years.
“Discussions between the Greek government and the troika were successfully completed this morning,” Greek Prime Minister Lucas Papademos’s office said in an emailed statement. “Political leaders have agreed with the result of those negotiations. Therefore there is a general agreement in the context of the new programme ahead of tonight’s euro group meeting.” The statement didn’t include any details.
The accord came after Greek Finance Minister Evangelos Venizelos arrived in Brussels for an emergency meeting of euro region finance ministers this evening to discuss the Euro 130-billion ($173 billion) lifeline and a debt swap that will impose a loss of about 70 per cent for investors.
Greece faces a Euro 14.5-billion bond payment on March 20 and is struggling to secure financing to avert a collapse of the economy that could spark a new round of contagion in the euro area.
European stocks rose with the Stoxx Europe 600 Index adding 0.4 per cent at 4.02 pm in Berlin. The euro was up 0.3 per cent to $1.3300.
Talks over austerity measure between Papademos, who is the interim prime minister, and the so-called troika — the European Commission (EC), European Central Bank (ECB) and International Monetary Fund (IMF) — had stalled over Euro 300 million of pension cuts.
Creditors met in Paris on Thursday over a deal in which they would accept an average coupon of as low as 3.6 per cent on new 30-year bonds in the exchange. The aim of the transaction is to reduce the country’s debt burden to 120 per cent of gross domestic product by 2020 from 160 per cent last year. A formal offer for the debt swap must be made by February 13 to allow all procedures to be completed before the March 20 bond comes due, Venizelos has said. The tussle in Athens threatened to hold up the debt swap that will slice Euro 100 billion off more than Euro 200 billion of privately-held debt.
ECB rates unchanged
The ECB on Thursday left the benchmark interest rate at a record low of 1 per cent. ECB President Mario Draghi, speaking to reporters in Frankfurt, declined to comment on whether the ECB will use its own Greek bond holdings in any swap to help alleviate the nation’s debt burden.
“I cannot say anything on how our holdings of Greek bonds will be treated,” he said.
A Greek decision has hung in the balance for almost a week as lenders demanded officials sign on to measures ranging from a reduction in the minimum wage and lower pensions, to immediate job cuts for as many as 15,000 state employees.
Greece’s unemployment rate in November rose to 20.9 per cent from 18.2 per cent in the previous month, according to an emailed statement from the Athens-based Hellenic Statistical Authority on Thursday.
Vodafone Group Plc, the world’s biggest mobile phone company, is moving cash from Greece into the UK “every evening,” mirroring efforts by others companies such as GlaxoSmithKline Plc and WPP Plc to hedge against the European debt crisis, Chief Financial Officer Andy Halford said on a conference call on Thursday.
Greek Creditors Meet
Private creditors meanwhile, met in Paris on Thursday to discuss the debt swap. The Institute of International Finance held the meeting to go over technical matters so the debt swap could be implemented quickly if an accord between Greece and troika is was reached, two people familiar with the matter who declined to be identified because talks are private, said before the discussions.
While the prime minister and party chiefs have agreed to make further cuts this year equal to 1.5 percent of gross domestic product, political leaders are worried about the effect on voters of further cuts in wages and pensions ahead of elections due as early as April. Unions, which went on strike this week, have derided the conditions as “blackmail.”
Spending Cuts
Greece will pledge permanent spending cuts, including lower pension payments and a 20 percent reduction in the minimum wage, as the economy contracts this year at a faster pace than originally estimated, according to the draft of the agreement discussed at the meeting with party heads, and obtained by Bloomberg News.
The troika argues such moves are needed to boost competitiveness. Those opposed say the cuts would deepen the country’s recession, now in its fifth year.
Greece’s private-sector union GSEE has called a 48-hour strike beginning tomorrow, according to an e-mailed statement, sent from the Athens-based union. ADEDY, the public-sector union, is also participating in the 48-hour strike, union spokeswoman Despina Spanou said by telephone.
—With assistance from Tony Czuczka in Berlin, Aaron Kirchfeld in Frankfurt and Jonathan Stearns in Brussels. Editors: Leon Mangasarian, Alan Crawford.
