Greek PM warns against “abrupt” loss of EU cohesion funds

ATHENS, April 18 (Reuters) – Greek Prime Minister Lucas Papademos urges Greece’s European Union partners on Wednesday not to cut EU structural and agriculture funds to his country, saying it needs support to return togrowth.

EU leaders are set to agree by the end of the year an overhaul of the bloc’s funding for poor regions and for agriculture for 2014-2020, with less aid going to old EU members such as Greece and more to eastern and central Europe. “The priorities … should not lead to an abrupt interruption in the financing of a key sector for the Greek economy at this point in time,” Papademos wrote in a letter to European Commission President Jose Manuel Barroso.

He also warned againstslashing EU aid funds to the wider Athens Attiki region, which accounts for nearly half of the country’s 11 million population, stressing that the region was struggling with the crisis.

In the letter – which outlined projects to help Greece pull itself out of five straight years of recession on the day the European Commission published ideas on the same topic – Papademos stressed that reforming the state was crucial to achieve this goal.

He said a weak administration was misusingresources and lacking efficiency, hindering the private sector and fostering social injustice.

Papademos, a technocrat, took over as prime minister in November to lead an emergency coalition with the sole aim of securing EU bailout funds. Therewill be a general election on May 6.

In the document published on Wednesday, the European Commission said Greece must liberalise its labour market and business environment and focus on its public finances and credit flow to companies if it wants to make a positive impact on its economy this year.(news)
The EU executive also said that Greece must make better use of the structural funds it is getting now from the bloc. Of the over 20 billion euros allocated for 2007-2013, lessthan half has been spent, it said. Another 20 billion euros of agricultural funds have been set aside for Greece for the same period, the document said.

The European Union and the IMF have agreed two bailout to keep Greece out of bankruptcy over the past two years. These loans come on top of the bloc’s aid to all its member states, including Greece, in areas ranging from agriculture and education to building highways and other infrastructure.

(Reporting by Ingrid Melander; Additionalreporting by Charlie Dunmore in Brussels. Editing by Jeremy Gaunt.) Messaging:


HIGHLIGHTS-Comments from meeting of EU finance ministers

BRUSSELS, Feb 21 (Reuters) – Euro zone finance ministers and representatives of the private sector finalised a deal early on Tuesday morning that will provide 130 billion euros of new financing to Greece in return for public spending cuts andeconomic reforms.

The deal relies on private sector holders of Greek government bonds accepting a greater than 53 percent loss on the nominal value of their holdings, which will help reduce Greece’s debt by around 100 billion euros. Following are comments by ministers and officials before a meeting of EU finance ministers in Brussels on Tuesday.

“We have tackled the task which was given to us by the decisions of the council. They decided to make a second package, which includes more money than the first one, and it gives more time to the Greeks to restructure.

“The private sector has now been asked to take on and sign the deal that’s on the table by the first weekof March. By the end of February Greece has to execute a plan of action. We will examine that again on a Sunday, at a special meeting of the Eurogroup.”

“I think it’s very good thatthere is an agreement. It’s a very tough agreement. It has a balance between solidarity and discipline, and it has a lot of steps ahead of us. So I think the way it’s constructed is not just an agreement on paper one night in Brussels, it’s a way ofhandling the Greek economic problems.

“It’s a very critical time in European history, not only for Greece. Of course there will be a lot of conflict because it’s a very harsh economic plan. It’s also a large loan that’s been given and a largehaircut that’s been taken, so of course there will be debate and conflict and this is politics. But of course I also hope that this will be a way to a solution for the Greek economy.”

“What’s been done is a meaningful step forward. Of course the Greeks remain stuck in their tragedy; this is a new act in a long drama. I don’t think we should consider that they are cleared of any problems, but I do think we’ve reduced the Greek problem to just a Greek problem. It is no longer a threat to the recovery in all of Europe, and it is another step forward.

“The risk for Greece of course is that they don’t carry through on their commitments and return to the situation they were in at the start.

“The big risk was that Greece was going to precipitate a crisis in the German, French, Italian banking systems. Now we have a practical guarantee for outstanding Greek bonds, which means that general risks have reduced in a dramatic way.”

(Reporting by Charlie Dunmore, Robert-Jan Bartunek and Nicholas Vinocur) Messaging:

UPDATE-Greece still to convince sceptical euro zone (and many, many crows and vultures flying low and hoping for the worst)

By Renee Maltezou and Harry Papachristou ATHENS, Feb 13 (Reuters) – The Greek government was under pressure on Monday to convince a sceptical euro zone that it would stick to the terms of a multi-billion-euro rescue package endorsed by lawmakers despite violent protests.

Parliamentbacked drastic cuts in wages, pensions and jobs on Sunday as the price of a 130-billion-euro ($172 billion) bailout by the European Union and International Monetary Fund, as running battles between police and rioters in central Athens outsideparliament drove home a sense of deepening crisis.

Firefighters on Monday doused the smouldering remains of cinemas, shops and banks set ablaze in the capital. It was the worst violence in years, and spread from Athens to Greece’s second city ofThessaloniki and the islands of Crete and Corfu.

Euro zone finance ministers meet on Wednesday.

The fragile ruling coalition of Prime Minister Lucas Papademos has until then to say how 325 million euros of the 3.3 billion euros inbudget savings will be achieved.

Brussels also wants written commitments from party leaders that they will implement the terms of the deal even after an election pencilled in for April.

But a recession, now in its fifth year, and two yearsof painful spending cuts have shaken the political establishment to its core.

Voters could be driven further to the left and right, straining EU confidence in whether Greece will hold the course.

First reaction from euro zone paymasterGermany was cautious.

“Now we need to wait and see what comes after the legislation,” Economy Minister and deputy Prime Minister Philipp Roesler said on German television.

“We have taken one step in the right direction but we are still far from the goal,” he said.

Critics on Monday said more austerity would only condemn the economy to an ever-deepening downward spiral.

“Yesterday’svote in the parliament may have saved the country temporarily from default, but the Greek economy is going bankrupt and the country’s political system is failing,” the head of the Greek Commerce Confederation, Vassilis Korkidis, said in a statement.

Papademos had warned of a “social explosion” if lawmakers rejected the deal and Greece defaulted next month. They passed it after 10 hours of fiery debate.

But the unrest outside, and a rebellion by 43 parliamentarians of the rulingcoalition, suggested Athens might already be on the brink.

“The people yesterday sent a message: Enough is enough! They can’t take it anymore,” said Ilias Iliopoulos, general secretary of public sector union ADEDY. The cuts include a 22 percent reduction in the minimum wage and 150,000 jobs from the public sector workforce by 2015.

Greece needs the international funds before March 20 to meet debt repayments of 14.5 billion euros, or suffer a chaotic default that would send shockwaves through the euro zone.

The deal provides for a bond swap to ease Greece’s debt burden by cutting the real value of private-sector investors’ bond holdings by some 70 percent.

Greece would have missed a Feb. 17deadline to offer a debt “haircut” to private bondholders if the vote had not passed.

But the bill strained political loyalties and puts further pressure on the Papademos government.

A Greek government spokesman said that, “despite the problems, we will proceed with the implementation of our commitments.”

But in comments that could further sow doubt in the minds of euro zone finance ministers, conservative New Democracy leader Antonis Samaras – a frontrunner to be the nextprime minister – indicated Athens might yet try to renegotiate the deal.

“I am calling on you to vote for the new loan agreement because I want to avoid falling into the abyss, to restore stability,” he told Sunday’s parliamentary debate, “sothat we can have the possibility tomorrow to negotiate and change the policy that is being imposed upon us today.”

“We have to exist first to be able to change it.”

Tens of thousands of people had filled Syntagma Square outside parliamenton Sunday. The violence that erupted was the worst since 2008, when unrest gripped Greece for weeks after police shot a 15-year-old schoolboy.

The rioters were a minority, but spoke to the groundswell of angeramong Greeks who say their living standards are already collapsing and more austerity will only deepen their misery. Unemployment in Greece reached 20.9 percent in November, and half of young Greeks are jobless.

In all, 150 shops were looted in the capital and 48 buildings set ablaze. Some 100 people – including 68 police – were wounded and 130 detained, a police official said.

The Attikon cinema, housed in a neo-classical building dating from 1870, was left a blackened shell.Terrified Greeks and tourists fled the rock-strewn streets and the clouds of stinging teargas, cramming into hotel lobbies for shelter as lines of riot police struggled to contain the mayhem.

“When will we exit the crisis, why can’t they justtell us when this will be over?” said 53-year-old Nikos Kourkoulos, a municipality gardener and father of two who has seen his monthly salary cut by 600 euros since 2008.

Asian shares and the euro gained modestly on Monday and
MSCI’s broadest index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> edged up as much as 0.3 percent. (news)
Relief saw bank shares lead European stocks higher.

Papademos, a technocrat brought in to get a grip on the crisis, said violencewould not be tolerated, and acknowledged it might yet take time to impose the cuts on an angry nation.

Six members of his cabinet had resigned over the bill.

“The full, timely and effective implementation of the programme won’t be easy,”Papademos told parliament.

“We are fully aware that the economic programme means short-term sacrifices for the Greek people.” ($1 = 0.7582 euros)
(Additional reporting by Karolina Tagaris, Dina Kyriakidou, Ingrid Melander in Athens andTatiana Fragou; Writing by Ingrid Melander and Matt Robinson, editing by Peter Millership)

FOREX FOCUS: The Euro Needs To Watch The Greeks Now (anti-euro rant food for you pessimists out there…) – by Nicholas Hastings

By Nicholas Hastings


LONDON (Dow Jones)–The euro might be discounting Greece, but it can’t afford to discount the Greeks.

For the last few weeks the single currency has remained firm as liquidity injections, known as LTROs, from the European Central Bank have helped to lower the cost of peripheral debt funding.

As the risk of contagion from Greece has subsided and global growth prospects in general have improved, investors have been happy to continue covering their short euro positions.

Pledges from German Chancellor Angela Merkel to keep Greece on side and suggestions from the ECB that it is prepared to bend its monetary financing rules to provide Greece with even more cash have all helped the euro to weather the latest stages of the Greek debt crisis.

In fact, investors have become so comfortable that the Greek government will reach an accommodation with the troika, ensuring that it gets a second bailout of EUR130 billion and meets its first EUR14.5 billion payment deadline by March 20, that currency options show that one-month volatilities have fallen to a nine-month low.

In plain English, that means fears of some nasty fall in the euro in the short-term are fading fast.

This remains the case even though tensions continue to rise.

Euro-zone finance ministers have rejected the latest austerity package, packing the Greek Finance Minister Evangelos Venizelos back to Athens Thursday night with instructions to cut another EUR325 million, provide assurances on implementation and get the whole deal through parliament by Sunday.

Then, a deal with private sector bondholders should be completed on Monday, allowing euro-zone ministers to get back together and sign it all off on Wednesday.

But, this is just when the Greeks themselves may start to have more of a say.

Data this week shows that even without the latest round of vicious spending cuts, the Greek economy is already imploding. Industrial production is down another 11.3%, unemployment soaring over 20% and the rate of youth unemployment alone climbing over 45%.

Unions have already responded with a series of strikes including the latest 48-hour walk out on Friday and Saturday. The Labour Minister has already resigned and although the government claims it will have a healthy majority to get through Sunday’s vote, the result is hardly a foregone conclusion as more members of parliament come under pressure to vote against the package.

As Greek officials have admitted, the vote will be very much a vote of membership of the euro itself.

All this, of course, comes ahead of any actual implementation of the latest cuts, which are hardly likely to find much support ahead of elections once the technocrat government of Lucas Papademos steps down in a few months.

As risk of even more social disorder rises and Greece’s membership of the euro comes under more doubt, investors could well find that taking up new short positions in the currency is probably their best form of defense.

This could well explain that while short-term volatilities may have fallen in the options market, longer-term ones are still edging higher as investors hedge their bets on how the Greeks themselves will cope.

Bloomberg TNI FRX POV

Reuters USD/DJ

Thomson P/1066 or P/1074

(Nicholas Hastings is a Senior Correspondent in London for Dow Jones Newswires who has written about foreign exchange for more than 20 years. He previously covered a variety of markets, including equities, fixed income, commodities and energy. He can be contacted on +44-20-7842-9493 or by email: or on twitter @NickHastingsDJ)

Greece To Continue Debt Talks With Creditors

ATHENS — Greece and its private-sector creditors agreed to meet again Friday in a race to negotiate a EUR100 billion debt write-down for the country amid concerns that Greece’s funding needs might be bigger than originally thought.

According to a statement issued by the creditors committee, “some progress was realized” after a first day of meetings in the Greek capital Thursday but no deal had yet been clinched.

“Discussions here in Athens today focused on legal and technical issues on the voluntary [debt restructuring] and some progress was realized. Work will continue tomorrow,” said the statement, issued by the Institute of International Finance.

A senior Greek finance ministry official also confirmed that the talks were set to continue.

The IIF, a Washington-based lobby representing the world’s major banks, is leading the negotiations on behalf of private creditors with the Greek government on the debt restructuring.

In October, the IIF agreed to a “voluntary” 50% write-down in the value of Greek bonds that would be conducted through a distressed debt exchange swapping old Greek government bonds with new ones.

The bond deal is part of a broader EUR130 billion bailout promised to Greece by its European partners and the International Monetary Fund at a European summit in October. Without private-sector agreement, the governments won’t contribute their share to the package.

However, the talks have stumbled twice amid differences over the interest rate the new bonds would pay. Germany and the IMF have been pushing the creditors to accept an interest rate below 3.5%, while the creditors have indicated that 4% was the minimum they could accept under a voluntary deal.

At issue is Greece’s deteriorating debt dynamics. The goal of the October agreement was to cut the country’s debt ratio to no more than 120% of gross domestic product by 2020, down from more than 160% currently.

But since then, a deeper-than-expected recession in the Greek economy and a budget deficit that has widened to nearly 10% of GDP could put those projections in doubt. A new debt-sustainability study, due for release by the European Union and the IMF once talks with the private creditors are completed, might require a rethink on the funding Greece will need to be able to service its debt for the rest of the decade.

The IMF and the stronger euro-zone countries are reluctant to permit high coupons, in part because they would have to lend Greece the money to pay them and in part because high interest burdens make it less likely the country can get its debt under control.

That leaves two options: pressure private-sector bondholders to accept more losses, or accept that other euro-zone countries and the IMF will have to kick in more support.

With private-sector talks already difficult, suggestions are growing that any additional burden would have to be taken up by euro-zone governments.

IMF Managing Director Christine Lagarde said Wednesday that Greece’s public-sector creditors may have to take a hit on their loans if private lenders can’t agree on a restructuring plan that goes far enough to make the country’s debt sustainable. The Fund said this didn’t assign a specific role to the ECB, which has rigidly opposed accepting a write-down on its Greek bond holdings. Many ECB officials would be likely to view losses on their Greek holdings as a violation of the central bank’s statutes, which forbid it from financing governments.

On Thursday, European Union Economics Commissioner Olli Rehn said public-sector lenders may have to increase their contribution to Greece’s overall debt deal. He said he was hopeful agreements could be struck soon to increase euro-zone bailout funds and IMF resources.

“I don’t rule out a small adjustment of lending needs of the euro-area member states,” he said in an interview with The Wall Street Journal, referring to the pending update in Greece’s debt-sustainability study.

Eurogroup President Jean-Claude Juncker acknowledged earlier this week that the Greek debt-reduction program “is off track.”

Just how far off track won’t be known until the new debt assessment is released. This won’t happen until after an EU summit Monday, say German officials. People familiar with the talks estimate that Greece’s deteriorating fiscal position could now require an additional EUR20 billion to put Greece on a sustainable footing.

“This gap, which is around 10% of GDP, has to be covered for the second bailout loan to be approved,” said one person familiar with the situation.

Ian Talley in Washington and Stephen Fidler in Davos, Switzerland contributed to this article.

By Costas Paris, Nektaria Stamouli and Alkman Granitsas, Dow Jones Newswires; +30 210 331 2881;