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: ingrid.melander.reuters.com@reuters.net)

Annunci

Recap – Euro Zone Withholds Greek Aid Until Austerity Passed

BRUSSELS — Euro-zone finance ministers withheld approval for a second Greek bailout Thursday and demanded fresh proof from Greece’s political leaders that they were ready to deliver on past and new pledges to seal a second bailout package as early as next week.

After a meeting Thursday, the ministers said they will meet again Wednesday to push through the EUR130 billion ($173 billion) bailout that Greece needs to avoid default.

But first, the Greek parliament must approve new austerity policies and a package of economic overhauls and the government should detail how it would bridge a fiscal gap of EUR325 million to meet budget targets this year.

“We still have a lot of work to do by next Wednesday,” Dutch Finance Minister Jan Kees de Jager said after the meeting. “Greece have been given their homework, which is explaining what’s in the EUR325 million.”

Greek finance minister Evangelos Venizelos put the country’s choices in starker terms saying Greece must make a “final, strategic” decision about its membership in the euro zone over the next six days.

“We have to decide between tough decisions and tougher decisions,” Venizelos told reporters after the meeting.

Venizelos said there had been objections from a number of other countries that Greece hadn’t fully set out how it would find the necessary savings for 2012.

Earlier Thursday, Greek Prime Minister Lucas Papademos said that political leaders supporting his government had agreed on a reform package following days of difficult negotiations with a troika of lenders–the European Union, the European Central Bank and the International Monetary Fund. European economic and monetary affairs commissioner Olli Rehn confirmed that the EU had received a staff level agreement between Greece and the troika.

But Rehn said this wasn’t enough to unlock a fresh bailout package.

“It’s up to the Greek government by concrete actions through legislation and other actions to convince its European partners that the second program can be made to work,” he told reporters on his way into the meeting.

German Finance Minister Wolfgang Schaeuble said he was confident Greece could complete its debt restructuring in time for a March 20 debt repayment. But conditions for a final agreement on a new bailout package are “not there yet,” Schaeuble said.

Thursday’s political deal in Athens followed protracted overnight negotiations between Greece’s main political leaders–from the Socialist, or Pasok, party, the conservative New Democracy party and the small nationalist Laos party–over what measures they were prepared to sign up to win the bailout deal.

The three political party bosses had earlier agreed to most of the creditors’ demands, including private sector wage cuts and public sector job cuts, but during night-long negotiations they were divided over a plan for deep cuts in pension benefits, leaving a roughly EUR300 million shortfall in this year’s budget targets. Officials later said an agreement was reached but no details were announced on how the gap would be covered.

As the focus of the discussions shifted to Brussels, officials indicated patience with Athens was wearing thin.

“What’s important in Athens isn’t important for everyone else,” a European government official told Dow Jones Newswires, adding that “there is a list of 10 to 15 questions” about the Athens political deal announced Thursday that need answering.

The EU and IMF are considering a number of options to ensure Greece prioritizes repayment of debt ahead of funding government operations. One of these is the creation of an escrow account that would control the bailout funds and have the power to repay Greece’s debt before lending to the Greek government.

“We are considering it seriously because it is one relevant possibility for reinforcing surveillance and also effective implementation of the program,” Rehn said after the meeting.

Several ministers have made it clear they want to see what parliamentary backing the coalition government can muster for new measures before giving a green light for the package.

The first crack in the government’s unity came earlier Thursday with the resignation of Deputy Labor Minister Yannis Koutsoukos.

“Our creditors ignored the arguments and factual proposals of the Labor Ministry and those of the finance minister. In an extortionate manner which is completely improper and shameless, they [creditors] imposed measures which demolish the structure of labor relations,” he said in a statement.

Still, the coalition has a big majority and the government should be able to win parliamentary backing for the measures despite expected defections. The first votes could come as early as Sunday.

But Greece is walking a tight timeline. It needs the new bailout and a debt restructuring deal in place before March 20 when it currently faces a EUR14.4 billion debt payment. Without the two deals in place, Greece is very likely to default.

A debt swap intended to cut Greece’s private-sector debt by about EUR100 billion is “practically finalized”, Rehn said.

The debt-restructuring deal appeared near completion after private-sector creditors indicated earlier they would accept lower interest rates on new Greek bonds they will receive after a 50% haircut.

Under the draft agreement with the troika of official lenders, Greece will slash minimum wages in the private sector by 22%, abolish permanent jobs in state enterprises and cut 150,000 jobs in the public sector by 2015, among other measures.

The economy is expected to contract 4% to 5% in 2012, but return to growth next year, although many private-sector economists are skeptical that Greece’s economy is anywhere close to coming out of recession.

The international lenders had asked Greece to come up with EUR3.2 billion in spending cuts for 2012 alone. They also sought the mass layoff of some 15,000 civil servants in Greece’s bloated public sector in 2012, as well as steep cuts in supplemental pensions paid to retirees.

While Greece comes under pressure to implement the tough reforms, fresh protests loom. Greek unions called a 48-hour strike beginning Friday as anger mounts over round after round of austerity.

At an October summit, it was decided that private-sector haircuts would suffice to bring the ratio of Greek debt to gross domestic product down to 120%. On those assumptions, leaders agreed to grant Greece a second bailout of up to EUR100 plus an extra EUR30 billion that Greece could use as sweeteners to lure in private creditors taking losses in its debt restructuring.

But as the Greek economy continued to deteriorate since October, the agreed bailout may not be enough to cover Greece’s funding needs leaving a gap of up to EUR15 billion that may still need to be filed.

The ECB could carry some of those losses by agreeing not to make a profit on some of the Greek bonds it purchased under its bond-buying program. Ahead of Thursday’s meeting, ECB President Mario Draghi said the ECB couldn’t accept a loss on its holdings of Greek bonds, but didn’t entirely rule out some role for the institution in a new bailout package for the Greek government.

-By Matthew Dalton, Matina Stevis and Costas Paris, Dow Jones Newswires; +32 (0)2 741 1481; laurence.norman@dowjones.com

(Geoffrey T. Smith, Laurence Norman and Frances Robinson in Brussels, Alkman Granitsas and Stelios Bouras in Athens, and Margit Feher in Frankfurt contributed to this article.)

Greece Edges Towards Debt Deal With Lower Yield

ATHENS — Talks between Greece and its private sector creditors over a EUR100 billion debt write-down edged towards an agreement, with bond holders seemingly willing to accept lower yields on their future holdings of Greek debt, a source close to the talks said Friday.

According to the source, the two sides were discussing a deal that would see Greece pay an “average coupon below 4%” on newly issued Greek debt, with the talks centering around an average yield of around 3.7-3.8%.

That is below what Greece’s private sector creditors–led by the Washington-based Institute of International Finance–has previously indicated it was willing to accept, but comes closer to what Greece’s official creditors have been demanding.

However, the source said the IIF is also asking for higher returns on those new bonds when Greece’s economy returns to growth–reviving a proposal previously floated in the discussions.

Talks between the two sides are due to continue Friday in the Greek capital after a two-and-a-half-hour meeting Thursday between IIF head Charles Dallara and Greek Prime Minister Lucas Papademos and Finance Minister Evangelos Venizelos.

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

In October, the IIF, a lobby group representing more than 400 of the world’s major banks, 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 a precondition for 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 repeatedly stumbled amid differences over the interest rate the new bonds would pay. Germany and the IMF have pushed 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 from more than 160% currently.

But since then, a deeper-than-expected recession and a budget deficit that has widened to nearly 10% of GDP has cast doubt on those projections. 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, partly because they would have to lend Greece the money to pay them but also because high interest burdens make it less likely the country can get its debt under control.

That leaves two options: pressure private-sector bond holders 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, while there have also been growing calls for the European Central Bank to take part–directly or indirectly–in the debt write-down.

In the past two days, IMF Managing Director Christine Lagarde and European Union Economics Commissioner Olli Rehn have both said that Greece’s public 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.

On Thursday, Jean-Claude Juncker, chairman of the college of eurozone finance ministers, suggested the ECB should consider playing a role, something the bank has resisted. Many ECB officials view losses on their Greek holdings as a violation of the central bank’s statutes, which forbid it from financing governments.

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

-By Costas Paris and Alkman Granitsas, Dow Jones Newswires; +30 210 331 2881; alkman.granitsas@dowjones.com

WORLD FOREX: Currency Markets Steady After Friday’s Ratings Storm

By Eva Szalay
Of DOW JONES NEWSWIRES

LONDON (Dow Jones)–Currency markets were largely steady in European hours Monday, with the euro trading above a 16-month low against the dollar after a sharp pre-weekend selloff in the single currency.

Investor sentiment remained fragile as the market continued to work out the ramifications from Friday’s euro-zone sovereign rating downgrades and in light of Greece’s rocky negotiations with international creditors to restructure its debt and stave off default.

The single currency traded as low as $1.2626 in Asian hours before consolidating above $1.2640, while against the yen it touched a fresh 11-year low in early Asian trade of Y97.03 before gently recovering.

Trading conditions were quiet, with U.S. markets mostly shut due to a holiday, European equities mixed and euro-zone sovereign bond markets in a calm frame of mind after Standard and Poor’s on Friday downgraded nine European countries, including France’s treasured triple-A credit rating.

“We expect the euro to remain under downside pressure as the latest round of downgrades to sovereign ratings in (Europe)… will likely trigger a further adjustment to international investor portfolio holdings of European assets,” said Morgan Stanley in a note to clients.

Also weighing on traders’ minds were reports of discord between Greece and its creditors.

“Greece is definitely coming back on the agenda, as negotiations with its private sector creditors are in a crucial stage,” said Ian Stannard, a currency strategist at Morgan Stanley in London. Although Greek Prime Minister Lucas Papademos expressed confidence Monday that talks would continue after negotiations stalled Friday over the interest rate Greece would pay bond holders.

If no deal is reached, Greece will need billions of euros in additional aid to help make major bond repayments due in March.

The wider implications of Friday’s downgrades in Europe were also being digested, with the sovereign-backed European Financial Stability Facility’s borrowing costs nudging higher ahead of Tuesday’s scheduled treasury bill sale by the bailout fund. S&P put the EFSF’s triple-A rating on credit watch negative last December.

“…(Given) the scale of downgrades from S&P on Friday it would appear inevitable that at some point the EFSF will also lose its AAA rating as well,” the Bank of Tokyo Mitsubishi-UFJ said in a note.

Russia wasn’t immune to the might of credit ratings agencies either, with Fitch Ratings announcing that it cut Russia’s credit outlook to stable from positive, citing rising political uncertainties. The ruble though was broadly unmoved by the news.

At 1136 GMT the euro was trading at $1.2676 compared with $1.2678 late Friday in New York, according to EBS via CQG. The currency was trading at Y97.29 compared with Y97.70. Sterling was at $1.5301 from $1.5318. The dollar was trading at Y76.77 from Y76.95.

The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at 81.436 from 81.473.

A summary of key levels for chart-watching technical strategists is below:

Forex spot:       EUR/USD    USD/JPY    GBP/USD    USD/CHF

Spot 1136 GMT     1.2676     76.76      1.5309     0.9538
3 Day Trend       Bearish    Range      Bearish    Bullish
Weekly Trend      Bearish    Range      Bearish    Bullish
200 day ma        1.3644     78.68      1.5847     0.9012
3rd Resistance    1.2808     77.06      1.5408     0.9726
2nd Resistance    1.2765     76.94      1.5369     0.9698
1st Resistance    1.2695     76.87      1.5343     0.9595
Pivot*            1.2727     76.88      1.5320     0.9500
1st Support       1.2624     76.73      1.5235     0.9515
2nd Support       1.2515     76.66      1.5135     0.9475
3rd Support       1.2452     76.60      1.5035     0.9450

Forex spot:       EUR/JPY

Spot 1136 GMT      97.29
3 Day Trend       Bearish
Weekly Trend      Bearish
200 day ma        107.36
3rd Resistance     98.36
2nd Resistance     98.13
1st Resistance     97.70
Pivot*             97.85
1st Support        97.04
2nd Support        96.64
3rd Support        94.95

-By Eva Szalay, Dow Jones Newswires; 44 20 7842 9305; eva.szalay@dowjones.com

Greek PM confident debt talks will be clinched in time

By George Georgiopoulos
ATHENS, Jan 16 (Reuters) – Greek Prime Minister Lucas Papademos promised a debt swap would be clinched in time and dispatched senior officials toWashington on Monday to break a deadlock in talks that has prompted new fears of a disorderly default.

Athens needs a deal with the private sector, the EU and the IMF to avoid going bankrupt when 14.5 billion euros of bond redemptions fall duein late March, but talks with its creditor banks broke down without an agreement on Friday. (news)
A leading representative for the creditors said Athens was not the problem in the talks, suggesting the issue lay with terms insisted onby foreign lenders keeping Greece afloat with aid.

The head of Greece’s debt agency and a senior adviser were travelling on Monday to Washington to meet International Monetary Fund officials, a government source said, and Athens put a braveface on the standoff.

“There is a little pause in these discussions. But I am confident that they will continue and we will reach an agreement that is mutually acceptable in time,” Papademos said according to a transcript of an interview withCNBC.

Under the bailout terms agreed in October, Greek privately held debt would be reduced by half so that, together with structural reforms, the overall debt to GDP ratio of Greece would fall to 120 percent in 2020 from 160 percent now. Inspectors from the EU, the IMF and the ECB, due in Athens on Tuesday for talks on a second, 130-billion-euro bailout, have warned they need the deal with the private sector to achieve that debt-reduction goal before they agree to give more aid.

Papademos said talks on these two processes must be completed over the next two to three weeks.

“This is the objective. I think the conditions are in place in order to do so,” Papademos told the broadcaster.

UNCERTAINTY GROWS Charles Dallara, head of the Institute of International Finance who represents Greece’s private creditors, told the Financial Times an agreement in principle was needed by the end of this week if it was to be finalised in time for the March bondredemptions and said the Greeks were not the problem.

“All the European heads of state said they wanted a deal with a 50 per cent (haircut) and a voluntary agreement,” Dallara was quoted as saying. “Some of their own collaborators are not following that decision.”

Negotiations stalled over the interest rate Greece will pay on new bonds it offers.

Greece, in its fifth year of recession, has continuously missed its fiscal targets, prompting speculation that the country mayneed further financial support to put its debt on viable footing.

The country has repeatedly flirted with bankruptcy in recent months, with only bailout loans from European partners and the IMF agreed on condition of unpopular austerity measureskeeping Greece away from a default.

Papademos played down speculation that Athens would need additional aid to that agreed at a euro zone summit in October.

“I think the funds that have been pledged at the Euro Summit, combined with theoutcome of the private sector involvement process should be sufficient in order to support financially the Greek economy,” Papademos said.

Uncertainty over fixing Greece’s debt crisis is more of a threat to Europe’s stability than the downgradeon Friday of nine euro zone countries’ credit ratings by Standard & Poor’s, British finance minister George Osborne said on Monday. (news)
The downgrades were largely expected and traders said pressure on Italian and Spanish bondyields on Monday were offset by the European Central bank stepping in to buy the bonds. (news)
Bill Gross, the manager of the world’s largest bond fund PIMCO, said in a Twitter post that Standard & Poor’s downgrade had made investors”aware” that countries can default and Greece would be the next example.

(Additional reporting by Angeliki Koutantou and Karolina Tagaris; Writing by Deepa Babington; Editing by Ingrid Melander/Mike Peacock) Messaging: deepa.babington.thomsonreuters.com@reuters.com)

Greece Scrambles To Complete Debt Talks

ATHENS — Greece’s talks with private-sector creditors on a debt write-down plan are entering their final stage, but key areas remain unresolved, representatives of private-sector creditors participating in the talks and Greek officials said Thursday.

The talks, which are set to resume Friday, come as fresh data confirmed that Greece remains mired in recession and will overshoot its deficit targets this year, raising new obstacles to a proposed EUR130 billion bailout for the country.

Greece’s European partners agreed in late October to cover the country’s budget deficits over the next three years, but insisted that private creditors share in the pain by writing off half the debt Greece owes them.

That debt restructuring would slice roughly EUR100 billion off of Greece’s total public debt–now estimated around EUR360 billion–and would save the government roughly EUR5 billion a year in debt-servicing costs.

Those talks are now in an advanced phase, with government officials saying the outlines of a final deal could come as early as next week.

“We are completely on track. Exploiting the momentum, by the end of the next week we could have the final outline for a deal with the private sector,” a senior Greek Finance Ministry official said.

“We may have the public formal offer by the beginning of February,” he added, speaking after a first day of meetings between Greek Prime Minister Lucas Papademos, Finance Minister Evangelos Venizelos, and Charles Dallara, head of the Institute of International Finance, or IIF.

The IIF, a trade body that represents more than 400 of the world’s biggest banks, is leading talks with the Greek government on the debt restructuring. Officials expect the agreement on the haircut to involve an exchange of old bonds for new ones with maturities ranging between 20 and 30 years and a coupon of 4% to 5%.

But many details still remain unresolved despite a pressing deadline to cut a deal.

“Despite the strong efforts and leadership of the Greek government, we are quite concerned about the lack of a clear process to finalize these negotiations,” Dallara said.

But the debt restructuring–and by extension the amount of money Greece’s European partners and the International Monetary Fund will pony up–depends on many of the country’s private creditors signing on to the debt write-down.

“If the participation [rate] does not reach 100%, greater support from our partners would be necessary,” Greek Deputy Finance Minister Philippos Sachinidis said in a radio interview Thursday.

That’s something that European taxpayers, particularly in Germany, as well as the IMF, may be loath to do. As a result, Athens is seriously considering using so-called collective-action clauses, or CACs, that would force a minority of holdout creditors to take losses, if the agreement is backed by a majority.

Other options could include lowering the interest rate on the bailout loans, and allowing Greece to buy back its bonds held by the European Central Bank at discounted prices, a possibility the ECB is likely to resist.

But even as the talks on the debt deal continue, fresh data Thursday confirmed that Greece’s steadily deepening recession has opened up an even wider hole in the budget deficit last year than expected.

With both tax revenues and pension fund contributions lagging behind targets, preliminary data from the finance ministry showed Greece’s central government budget deficit for 2011 widened 0.8% compared with the previous year, to EUR21.6 billion.

Final budget figures won’t be out for another two months, but government officials say the deficit will likely settle above 9.5% of gross domestic product–well above a recently revised 9% ratio and implying Greece most cover more than a EUR1 billion gap.

How to close the gap will be one of the issues Greece will address with a delegation of European and IMF officials–known locally as the troika–during talks next week in Athens.

“We see the budget deficit coming in around 9.6%-9.8% of GDP. All efforts is to keep it below 10% when the final numbers come out,” said a second Greek government official. “It will be above target and we expect the troika to push on more spending cuts.”

But those cuts are likely to push Greece even deeper into recession–most economists expect the economy contracted by 6% last year–as business bankruptcies and unemployment soar.

Despite that, the troika is also demanding steep cuts in labor costs–read: wages–as a way of boosting Greece’s competitiveness.

On Thursday, data showed Greece’s jobless rate continued to climb in October exceeding the 18% mark while private-sector workers called fresh strike action next week ahead of talks with employer groups over those proposed pay cuts.

The country’s statistics agency Elstat said Greece’s unemployment rate rose to 18.2% in October from a rate of 17.5% in September and 18.4% in August. The total number of unemployed people rose to 903,525 in October, compared with 857,656 a month earlier, the agency said.

“Employment contracted in October by 7% year-on-year. The downtrend in labor market conditions is showing no sign of easing up,” said Nikos Magginas, senior economist at the National Bank of Greece.

-By Alkman Granitsas, Stelios Bouras and Stephen Fidler, Dow Jones Newswires; +30 210 331 2881; alkman.granitsas@dowjones.com

–Costas Paris in London and Matina Stevis in Brussels contributed to this article.

Greece Says Debt Talks At ‘Very Good Point’

ATHENS Greek Finance Minister Evangelos Venizelos said Wednesday that talks with private-sector creditors on the country’s debt-write-down plan have advanced and are “at a very good point.”

“We are ready for the next meeting, maybe tomorrow morning, with our friend, Charles Dallara, from the IIF (Institute of International Finance),” he told an economic forum earlier, according to a copy of his speech. Dallara is the managing director of the IIF.

“I would like to think that with the support of our institutional partners, this scheme will be completed,” the finance minister also said.

The IIF represents the global banks and insurance companies that are among Greece’s largest private-sector creditors. At a euro-zone summit in October, IIF members agreed to accept a 50% reduction in the face value of their Greek bonds as part of a second aid package from the euro zone and the International Monetary Fund, but the details of that agreement have been under discussion since then.

Dallara is also likely to meet with Greek Prime Minister Lucas Papademos in Athens Thursday, according to government officials.

Greece is expected to complete talks on the structure of the debt plan around Jan. 16, a Finance Ministry official said last week.

By Stelios Bouras, Dow Jones Newswires; +30-210-3731772; stelios.bouras@dowjones.com