http://www.guardian.co.uk/business/2012/feb/20/debt-crisis-euro
Developments in Brussels, where EU spokesman Amadeu Altafaj is briefing the media about this afternoon's talks.
Altafaj said we have reached the "last mile" in covering the gap in Greece's 2012 budget, and that the Athens government must explain how this shortfall has been covered.
(Over the weekend, Lucas Papademos's cabinet agreed yet more austerity measures that, it says, makes up the €325m that was outstanding).
Interestingly, Altafaj also said that the eurogroup of finance ministers meeting in Brussels are preparing for Euro leaders to take a final decision on Greece's rescue package on March 1.
Altafaj also attempted to quash fears that Portugal could follow Greece. He said that the performance of Lisbon government's fiscal consolidation has been "satisfactory", and that economic reforms are working. Portugal has hit the targets set by the Troika [IMF, ECB, EU], but its economy is suffering – with the unemployment rate hitting 14% last week.
Here's some City comment on the Eurogroup meeting today.
Lee McDarby, Investec Corporate Treasury:
The biggest fear of the market is nothing to do with the ability of the Greek government to honour the agreement or the size of the haircut private investors will be forced to take on their debt (even though both these issues will be discussed this afternoon), but whether an agreement will actually be passed.
The uncertainty of the outcome of any decisions taken today cannot be underestimated with the most extreme being measures taken to set the wheels in motion for an orderly default by Greece and consequently an orderly exit from the euro and return to the Drachma.Elisabeth Afseth of Investec:Opinion polls in Greece show low support for the two main parties, who are the only ones to have signed an agreement to stick with the terms of the bailout programme after the election. Given the uncertain political outlook, European leaders may feel uncomfortable with agreeing a second bailout, especially as large payments are needed upfront to facilitate the private sector debt exchange. Patience with Greece is running thin and euro area finance ministers will look to impose control measures to try to ensure closer adherence to the fiscal and economic reform programme. But these concerns will probably be outweighed by fear of the consequences of no agreement today. Pushing Greece to a disorderly default and likely exit from the euro would set a dangerous precedent. Without clear ring-fencing of the remaining countries (and we doubt euro leaders have been quietly working out a bullet proof plan to contain contagion should Greece leave) it would be very risky to delay this issue any further, though we are getting used to broken deadlines.Just in – the Greek finance minister, Evangelos Venizelos, has declared that Greece has met all the conditions set by its lenders, and its people have made the necessary sacrifices.In a statement issued ahead of this afternoon's meeting (viewable in Greek here) , Venizelos said:We expect today to close a long period of uncertainty that has not been to the benefit of either the Greek economy or the euro area.Venizelos, who has railed against those calling for Greece to default, said Europe must send a "clear message" today that the decision will be taken on the basis of rules that are "stable" and do not keep changing.He added, though, that negotiations will continue until the last minute.The smell of teargas hung over the streets of central Athens last night as protesters gathered for an anti-austerity rally outside the Greek parliament.The idea that Greece's second bailout should be paid into an 'escrow' account is gaining ground this morning.An Escrow account would means that although Greece would have been granted its funds, its access would be restricted. Miss its targets and the funding stream could run dry.Austrian finance minister Maria Fekter has said that the eurogroup's working group has been looking at escrow options in recent days.That is being prepared on the technical level. The finance ministers will discuss this intensely at their meeting. I welcome such a special account.French finance minister Francois Baroin also said this morning that he supported the idea of paying Greece's funds into an escrow account.
and a look at the Telegraph live blog ( just for non redundant items )
10.51 Bruno Waterfield, our Brussels correspondent, reports that the key thing to watch out for at the meeting today are more signs that the IMF's patience is running out with eurozone failure to decisively tackle the Greek debt crisis:
"The IMF is expected to only offer minimal funds for a second aid package because it is concerned that the EU has not restructured Greek debt enough for Greece to be able to pay back what it owes, to end its spiral of soaring borrowing costs.The fund’s unwillingness to be as involved as it has been in previous bailouts will mean eurozone governments come under pressure to put up extra cash or take a loss on Greek bonds held by central banks and ECB.
The contribution by the IMF to the new rescue will be far lower than originally anticipated. Leaked figures show it will only contribute €13bn - or around 10pc. That’s far less than the one-third lent in the Irish, Portuguese and first Greek bail-outs.
Back in October, in a troika report the ECB tried to suppress, the IMF demanded that Greek debt be reduced to 120pc by 2020. But a new troika debt sustainability report, still secret, is said to show that Greek debt will only fall to 129pc by 2020. Those figures are almost bound to get even worse as optimistic growth forecasts for Greece fail to metrialise.
Based on previous statements and the fund’s policy, if the ratio cannot be cut to around 120pc then the IMF may not be able to help finance the Greek programme in future.
This could point to a possible summer default by Greece after the eurozone’s new bailouts fund is up and running in July. Can the eurozone continue as before if the IMF pulls out?"
10.10 According to Reuters, which cites a Greek finance ministry source, a "deeper haircut" for the country's private bondholders is still being discussed. The source added that there is agreement that interest rates on EU / IMF loans already paid to Greece will be lowered, Reuters reports:
07.59 The FT's Wolfgang Münchau argues this morning that Greece must default if it wants democracy:
When Wolfgang Schäuble proposed that Greece should postpone its elections as a condition for further help, I knew that the game would soon be up. We are at the point where success is no longer compatible with democracy. The German finance minister wants to prevent a “wrong” democratic choice. Similar to this is the suggestion to let the elections go ahead, but to have a grand coalition irrespective of the outcome. The eurozone wants to impose its choice of government on Greece – the eurozone’s first colony.I understand Mr Schäuble’s dilemma. He has a fiduciary duty to his parliament and is being asked to sign off on a programme that he doubts will work. Releasing the funds before an election is risky. What is to stop a new Greek government and a new parliament from unilaterally changing the agreement?
07.55 And they weren't the only ones. In Spain, protesters gathered in more than 50 towns and cities to demonstrate against a latest round of cuts which include sweeping labour reforms. AFP reported that "hundreds of thousands" of protesters gathered in Spain's capital, Madrid, and Barcelona.
Felipe Rey, 75, shouts slogans against the government's recently approved labour reforms during a protest in Madrid on Sunday. The banner reads: "without bread, without peace" (Photo: AP).
07.50 The unrest continues in Athens, with thousands taking to the streets yesterday in two separate rallies in the Greek capital.
A protester with a placard placed on on a rake chats with another at Syntagma square in front of the Greek parliament in Athens on Sunday.The placard reads " Do not Buy German and French products prefer Greek." (Photo:
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