Tuesday, October 4, 2011

Greece has until mid-Nov to get bailout loans

Greece has enough money to service all its financial obligations, including paying salaries, pensions and bondholders, until mid-November, the finance minister said Tuesday, as markets fell on fears the country could eventually default.
Greece had previously said it would start running out of money in mid-October if it didn't get the next €8 billion ($11 billion) installment of its €110 billion bailout package, from other eurozone countries and the International Monetary Fund on which it has been relying since May 2010.
But Venizelos sought to reassure Greeks and investors that the country has more breathing space.
"Until mid-November it is clear there will be no problem," said Venizelos, who returned from a eurozone finance ministers' meeting in Luxembourg early Tuesday.
At the meeting, the ministers indicated that while Greece would get the next batch of loans, that decision would not be made until later this month, after the international debt inspectors currently in Athens complete their review of Greece's reforms.
The inspectors from the IMF, European Central Bank and European Commission, collectively known as the troika, had suspended their review for several weeks in September amid concern over delayed implementation of austerity measures and missed targets. They returned to Athens late last month, and are continuing negotiations over reforms.
The delay had raised the possibility that Greece would run out of money to pay salaries and pensions. If it had found itself unable to pay bondholders, a messy default could have roiled financial markets across the world.
To convince the troika that it should get the next bailouts loans, the Greek government announced a series of new measures, including extra taxes on property, and began pushing through plans to suspend tens of thousands of civil servants on reduced pay.
But the measures have outraged Greeks who have had to endure more than a year and a half of austerity measures that have seen their incomes slashed and their living costs climb due to multiple tax hikes. Locked in a recession that is forecast to see the economy contract by 5.5 percent this year, even members of the government have voiced concern and said the public cannot face any more taxes.
Unions have responded with repeated demonstrations and strikes. They have taken over government buildings, forcing ministers to reschedule meetings with the troika on several occasions.
Venizelos, speaking at a press conference whose location had to be changed after protesting civil servants occupied the finance ministry, said the troika was discussing the outlook for 2013 and 2014 with the debt inspectors.
On Monday, the government submitted its 2012 budget to Parliament, with figures showing it had missed its deficit reduction targets for this year. The budget gap is expected to reach 8.5 percent of GDP, higher than the original target of 7.8 percent.
This could increase further to reach 9 percent if strikes and civil protests continue, weakening the implementation of reforms, Venizelos said.
He noted, however, that the country is projected to post a primary surplus — growth before the repayment of interest on outstanding debt is taken into account — next year.
Venizelos added that Greece will issue €880 million in bonds to Finland as collateral for the country's bailout loans to Athens under a second, €109 billion bailout deal agreed on in July. Finland had demanded guarantees in exchange for participating in the second package.
Other countries had threatened to demand similar guarantees if Finland got its way, but Venizelos said that no other eurozone states wanted the same collateral deal.
The minister insisted the Greek banking sector was completely safe, and that the ministry had received responses from all 57 countries it had sent letters of inquiry to over a bond swap deal that is part of the second bailout. He said the ministry was evaluating the responses.
Greece has said it would require a 90 percent participation rate in the bond swap...More.

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