PM writes to troika explaining need for extension
As government officials continue their efforts to come up with 11.5 billion euros in savings for 2013 and 2014, Prime Minister Antonis Samaras has given representatives of the country’s foreign creditors a letter explaining his country’s reasons for seeking an extension to its fiscal adjustment period, Kathimerini understands.
The two-page letter, given to envoys of the European Commission, European Central Bank and International Monetary Fund, known as the troika, reportedly explains the challenges posed by a deepening recession and pledges to “front-load” the reform program, implementing some of the measures as early as this year. It does not appear to be an official request for an extension of the fiscal adjustment period -- a key goal set out in the coalition’s policy statement -- but explains why such a move will be sought.
Troika officials, who briefed Samaras on Friday on the outcome of their meetings in Athens, are due to leave on Sunday and return in late August or early September before compiling their long-awaited report.
The premier and his two coalition partners, socialist PASOK leader Evangelos Venizelos and Fotis Kouvelis of Democratic Left, are to meet on Monday to finalize a package of 11.5 billion euros in savings for 2013 and 2014.
In a meeting with troika chiefs on Friday, Venizelos emphasized that an extension of Greece’s fiscal adjustment period until the end of 2016 is the only way the country can make the necessary reforms without “perpetuating the recession.” The socialist chief and Kouvelis both object to planned cuts to pensions and benefits although they do not seem to have countermeasures to propose.
As the government struggles with reforms, European policymakers are reportedly working on a “last-chance” scenario to keep Greece in the eurozone. According to Reuters, the ECB and national central banks are considering taking major losses on the value of their bond holdings in a bid to reduce Greece’s debts by 70 to 100 billion euros. Private creditors accepted big write-downs on their Greek bonds in March but this failed to put the economy back on track.
Underscoring concerns about the deepening euro crisis, candidate state Latvia said Greece should exit the bloc as it is delaying its recovery. “One ought to as soon as possible find a way to throw Greece out of the eurozone with as little damage as possible,” Latvian Finance Minister Andris Vilks told state radio.
http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_1_27/07/2012_454179
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Unionist lambasts troika's 'potion'
The head of Greece’s largest labor union launched a stinging attack on the troika on Friday and suggested that the new round of austerity the country’s lenders favor would lead to the Greek economy contracting by more than 5 percent next year.
“We agreed on only one thing: that we disagree on everything,” Yiannis Panagopoulos, the head of private sector union, GSEE, told journalists after meeting representatives of the European Commission, International Monetary Fund and European Central Bank. He said the austerity program had pushed Greece into recession.
“The gentlemen of the troika came to Greece as doctors, they were going to administer the medicine that would save the country and society, but they proved to be charlatans, quacks who gave us a potion that destroyed the economy and had a dramatic impact on Greek society,” said Panagopoulos, whose union has about 700,000 members.
“If they were civil servants and had to be evaluated, it is certain they would have been fired,” he added.
The GSEE chief said the coalition government’s decision to proceed with planned cuts of 11.5 billion euros over the next two years was “a political catastrophe that no Greek government should accept.” He said that if the savings that have been reported were made, they would cause the economy to contract by 5.5 percent of GDP and unemployment to rise to 28 percent next year.
Among the cost-cutting measures the coalition is considering are raising the retirement age from 65 to 67, limiting total basic and supplementary pensions to 2,500 euros and withholding 10 percent of pensions above 1,400 euros. The government plans to save more than 5 billion from pension reductions and other cuts to social security spending.
http://www.ekathimerini.com/4dcgi/_w_articles_wsite1_10919_27/07/2012_454189
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Bank union calls strike for Monday
Greek bank workers will hold a 24-hour warning strike today to protest decisions being made by international creditors and the government that may result in job losses.
The government “must realize it doesn’t have the moral or political right to show weakness, ignore the historical moment for Greek banks and succumb to the pressures of the creditors,” OTOE, the bank union federation, said in a faxed statement on Friday.
OTOE said Greek banks, including state-controlled ATEbank and Hellenic Postbank SA, should all be recapitalized and that jobs should be guaranteed.
Lenders need recapitalizing after suffering losses on their holdings of government bonds in a debt swap.
Mergers would reduce costs and make banks more attractive to investors, Panayotis Thomopoulos, who heads the Hellenic Financial Stability Facility, said on July 2.
Prime Minister Antonis Samaras was briefed by European Union and International Monetary Fund officials on Friday on what they want done to bring Greece’s reform program back on track, government spokesman Simos Kedikoglou said on NET TV. Disbursement of bailout funds is linked to implementation of the program. [Bloomberg]
http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_27/07/2012_454201
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OSI seen as last chance Greece has in eurozone
Debt haircut of 70-100 bln euros is possible
By Costas Karkayiannis
Greece’s European partners are contemplating a fresh restructuring of the country’s debt so as to bring it down to 70-100 billion euros and contain it close to 100 percent of the gross domestic product, according to a Reuters report on Friday.
Citing anonymous European officials, the report says the most likely scenario is for a haircut on the bonds held by the European Central Bank, the national central banks and possibly the eurozone states.
European officials believe that a second debt restructuring, which would now be a case of official sector involvement (OSI), is the last chance for Greece to remain in the eurozone. The ECB refused to comment on the report.
The aim of the new restructuring is to cut Greece’s debt by 30 percent, or 70-100 billion euros, as it is now becoming generally accepted that the first restructuring in March, which only involved the private sector, was not sufficient and that the recession of the Greek economy combined with the derailment of the Greek bailout program in recent months have rendered the achievement of the targets impossible.
There have been growing rumors over the last few weeks according to which the International Monetary Fund would no longer be willing to continue funding the Greek program unless the country’s debt becomes sustainable again.
With Reuters reporting that the cost of the second restructuring will be borne by the ECB and the 17 national central banks, a number of them including the ECB will also require recapitalization themselves.
Discussions and planning are only at an early stage, Reuters reported, but an anonymous European official involved in the talks said, “If I had to say what the chances are of an official sector involvement in Greece, I would say 70 percent.”
Another official said: “Our biggest mistake was that we did not manage to haircut the Greek bonds held by national central banks. That was really, really stupid.”
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