Greece Will Be Told No Alternative to Budget Cuts as EU Races to Save Pact
EU Leaders Hold Pre-G-20 Talks to Push Greece on Bailout
Louisa Gouliamaki/AFP/Getty Images
Anti-austerity protesters hold a banner during a student parade in Athens, attended by the Greek minister of education on October 28, 2011.
Anti-austerity protesters hold a banner during a student parade in Athens, attended by the Greek minister of education on October 28, 2011. Photographer: Louisa Gouliamaki/AFP/Getty Images
Nov. 2 (Bloomberg) -- Thanos Papasavvas, head of currency management at Investec Asset Management Ltd., talks about the debt crisis in Greece. Papasavvas, speaking on Bloomberg Television's "InBusiness with Margaret Brennan," also discusses European Central Bank monetary policy. (Source: Bloomberg)
Nov. 2 (Bloomberg) -- Former Greek Finance Minister Stefanos Manos discusses Prime Minister George Papandreou's call for a referendum on the Europe's rescue package. He talks with Francine Lacqua on Bloomberg Television's "On the Move." (Source: Bloomberg)
Nov. 2 (Bloomberg) -- Kate Moore, senior global equity strategist at Bank of America Merrill Lynch, discusses the European sovereign debt crisis, financial markets and investor sentiment. Moore speaks with Betty Liu, Dominic Chu and Julie Hyman on Bloomberg Television's "In the Loop." (Source: Bloomberg)
Nov. 1 (Bloomberg) -- Irene Finel-Honigman, adjunct professor of international and public affairs at Columbia University, Yannis Ioannides, an economics professor at Tufts University, and Ward McCarthy, chief financial economist at Jefferies & Co., talk about Greek Prime Minister George Papandreou's call for a referendum on the European Union's financing package. They speak with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)
Nov. 1 (Bloomberg) -- Domenico Lombardi, a senior scholar at the Brookings Institution, talks about Greece’s decision to call a referendum on its bailout and the challenges facing incoming European Central Bank President Mario Draghi. Lombardi speaks with Erik Schatzker and Scarlet Fu on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Nov. 2 (Bloomberg) -- Keagan York, head of foreign-exchange strategy at Compass Global Markets, talks about Europe's sovereign debt crisis and its implications for global currencies. York speaks from Sydney with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)
Nov. 2 (Bloomberg) -- Nick Sargen, chief investment officer at Cincinnati-based Fort Washington Investment Advisors, talks about the Greek referendum on Europe's bailout and the outlook for the U.S. and European economies. Sargen speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
Nov. 2 (Bloomberg) -- Daniel Speckhard, a former U.S. ambassador to Greece, discusses the Greek debt crisis and the outlook for Prime Minister George Papandreou's leadership. Papandreou triggered the latest upheaval in the two-year-long debt crisis by abruptly announcing on Oct. 31 a parliamentary confidence vote and his desire to hold a referendum on Europe's bailout. Speckhard speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)
Nov. 2 (Bloomberg) -- Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., talks about Europe's sovereign debt crisis and its implications for global stock markets. Oliver speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
EU Leaders Will Tell Papandreou No Alternative to Cuts
Kostas Tsironis/Bloomberg
Demonstrators wearing motorcycle helmets gather outside the Greek parliament during the second day of a national strike in central Athens, Greece.
Demonstrators wearing motorcycle helmets gather outside the Greek parliament during the second day of a national strike in central Athens, Greece. Photographer: Kostas Tsironis/Bloomberg
Angela Merkel and George Papandreou
John Macdougall/AFP/Getty Images
German Chancellor Angela Merkel and Greek Prime Minister George Papandreou.
German Chancellor Angela Merkel and Greek Prime Minister George Papandreou. Photographer: John Macdougall/AFP/Getty Images
EU Leaders Set to Push Greece on Bailout in Emergency Talks
Kostas Tsironis/Bloomberg
A newspaper displaying a front page photograph of George Papandreou, Greece's prime minister, lies discarded on a sidewalk in Athens.
A newspaper displaying a front page photograph of George Papandreou, Greece's prime minister, lies discarded on a sidewalk in Athens. Photographer: Kostas Tsironis/Bloomberg
European leaders are set to tell Greek Prime Minister George Papandreou he has no alternative to the budget cuts imposed in a week-old debt-crisis strategy that they are racing to prevent from unraveling.
Papandreou, his hold on power weakening, was summoned to Cannes, France, for emergency talks on the eve of a Group of 20 summit where he will hear from French President Nicolas Sarkozy that the “only way to resolve Greek debt problems” is through a deal hammered out in a six-day crisis-management marathon. German Chancellor Angela Merkel said today that policy makers “must bring calm to the euro.”
Papandreou triggered the latest upheaval in the two-year- long crisis by abruptly announcing on Oct. 31 a parliamentary confidence vote and his desire to hold a referendum on the rescue pact. Global stocks, the euro and bonds of debt-strapped countries tumbled yesterday as concern of a disorderly Greek default mounted.
People ‘Perplexed’
Papandreou will join a group at about 8:30 p.m. comprising Sarkozy, Merkel, International Monetary Fund Managing Director Christine Lagarde, as well as European Union authorities, according to a statement from Sarkozy’s office. They will have met at about 5:30 p.m. without Papandreou.
Japanese Finance Minister Jun Azumi said today in Tokyo that “everyone is perplexed” by Greece’s referendum decision and that the issue will be discussed at the Cannes summit.
Italian Prime Minister Silvio Berlusconi, under pressure to cut Europe’s second-biggest debt load, convened a special meeting of advisers late yesterday to discuss budget-cutting plans. Like Sarkozy, Berlusconi held crisis talks with Merkel yesterday. His key cabinet ministers will meet today to draft measures for the country’s financial-stability legislation, the Italian news agency ANSA said, citing government officials.
Europe ‘Surprised’
The euro rose against the dollar today, gaining 0.6 percent to $1.3784 as of 12:21 p.m. in London. It fell 3.1 percent over the previous two days.
The Stoxx Europe 600 Index was little changed after sinking the most in five weeks yesterday. German bonds fell after surging yesterday as investors sought the safest assets. The Greek two-year yield reached 92.35 percent today, a record high.
Papandreou’s announcement, which Sarkozy said “surprised all of Europe,” threatens to overshadow the Nov. 3-4 Group of 20 summit in Cannes. European leaders had designated the talks as a stage to present their plan to stamp out the crisis and end the threat to the global economy.
“The referendum will be a clear mandate and strong message within and without Greece on our European course and our participation in the euro,” Papandreou told his ministers in Athens late yesterday, according to an e-mailed transcript. It will “ensure this course in the most decisive way.”
Greek Pressure
EU officials had hoped to use the Oct. 27 rescue agreement, which includes renewed commitments to fiscal austerity as well as new rescue resources, to anchor their economic agenda at the G-20 summit and secure support from their counterparts. Now, officials meeting as the confidence vote plays out in Athens will be called on to assess the deal’s -- and the euro’s -- future, especially if Papandreou’s government falls and Greece comes under more pressure to default or leave the common currency.
European leaders agreed to boost the European Financial Stability Facility’s firepower to 1 trillion euros ($1.4 trillion), set aside 100 billion euros for Greece and provide 30 billion euros in collateral for a debt swap that will give Greece’s investors new, lower-risk bonds at 50 percent of the existing bonds’ face value.
The deal to reduce Greece’s debt load will do nothing to aid the country’s recovery from recession, opposition New Democracy leader Antonis Samaras said on Oct. 27. Papandreou’s majority meanwhile slipped as his support narrowed to 152 lawmakers in the 300-deputy parliament amid a party rebellion.
‘Profound’ Risks
Whether the EU’s plan would succeed “was a matter for debate. But at least there was a plan,” Yiannis Koutelidakis, an economist at Fathom Financial Consulting in London, said in a note yesterday. “The risks engendered by this move are profound for the euro in general, not just for Greece as the expulsion of any one member state would critically undermine the Economic and Monetary Union.”
Such uncertainty “will likely block any” governments outside the euro area from stumping up cash for its reworked rescue fund as the continent’s leaders would like, said Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc. While Brazil and Russia have signaled a willingness to help, Chinese officials say they want more details.
The leaders of Brazil, Russia, India, China and South Africa -- the so-called BRICS -- may also meet in Cannes today, Sergei Prikhodko, Russian President Dmitry Medvedev’s foreign policy aide, said yesterday. Chinese President Hu Jintao, who will also meet Sarkozy today, told Le Figaro newspaper yesterday that he wants stability in the euro area.
A lack of outside assistance will leave the European Central Bank under pressure to keep buying the bonds of stressed states, Cailloux said. While Sarkozy’s office said ECB President Mario Draghi would be in Cannes after taking office yesterday, his spokesperson said today he won’t be because of the need to chair tomorrow’s meeting of the central bank’s governing council
Nomura Holdings Plc economist Jens Sondergaard said although he expects the ECB to leave its benchmark rate at 1.5 percent this week, the “adverse market reaction” to Greece’s referendum call leaves a one-in-three chance of a 25 basis-point reduction.
To contact the reporters on this story: Rebecca Christie in Brussels at rchristie4@bloomberg.net; Simon Kennedy in Paris at skennedy4@bloomberg.net
To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net
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