Greece Wins EU Pledge for 4 1/2-Year Extension to Repay Emergency Loans
Greece's Finance Minister George Papaconstantinou
Jock Fistick/Bloomberg
George Papaconstantinou, Greece's finance minister, is surrounded by media as he arrives for an emergency meeting of European Union (EU) finance ministers in Brussels.
George Papaconstantinou, Greece's finance minister, is surrounded by media as he arrives for an emergency meeting of European Union (EU) finance ministers in Brussels. Photographer: Jock Fistick/Bloomberg
Greece is set to get an extra four- and-a-half years to repay emergency loans to match the seven- year term for the rescue Ireland received yesterday. Greek bonds and stocks gained.
Greece in May got a three-year aid package of 110 billion euros ($146 billion) from the euro area and the International Monetary Fund to prevent a debt default. Ireland yesterday won an 85 billion-euro package for seven-and-a-half years at a meeting where European finance ministers said they would “rapidly examine the necessity of aligning the maturities of the financing for Greece to that of Ireland.”
“This should now kill off any remaining doubt over Greece’s ability to repay aid,” European Union Economic and Monetary Affairs Commissioner Olli Rehn said after the meeting in Brussels. He said the step, which will be preceded by talks with the Greek government, would be “very important” in helping to ensure the “debt sustainability” of Greece.
Prime Minister George Papandreou’s government may be unable to respect the original timeframe for repaying quarterly aid installments as tax revenue slumps in an economy forecast to contract 4.2 percent this year and 3 percent in 2011. Higher EU estimates for Greece’s 2009 debt and deficit in mid-November forced the government to announce extra austerity measures to reach targets set as a condition for receiving the funds.
Budget Deficit
Greece’s budget deficit last year was 15.4 percent of gross domestic product, a record for the euro area, according to the EU statistics office. The gap will be 9.4 percent of GDP this year -- above an original 8.1 percent goal agreed to in May -- and 7.4 percent next year, according to the Greek government.
Greek bonds rose today, sending the 10-year yield down 13 basis points to 11.78 percent. Greek stocks advanced for the first time in seven sessions, led by banks including EFG Eurobank Ergasias SA and National Bank of Greece SA.
Greece’s first aid repayment is due in 2013. The country’s gross borrowing needs will rise to 70.8 billion euros in 2014 from 53.2 billion euros in 2013 on repayments to EU states and the IMF, IMF documents show.
IMF Managing Director Dominique Strauss-Kahn said in October that he would be ready to give Greece more time to pay back its aid from the Washington-based lender, which provided 30 billion euros of the Greek bailout, if European nations decide to do so first.
The government of German Chancellor Angela Merkel reacted the same month by saying it was “not in favor of extending the repayments schedule” for Greece and any such move would be “premature.”
To contact the reporter on this story: Jonathan Stearns in Brussels at jstearns2@bloomberg.net
To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net
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