Greece Delivers Austerity Accord to Win Approval for Bailout
Greek political leaders announced agreement on austerity measures, clearing the way for a deal to cut the nation’s debt and win its second rescue in two years.
“Discussions between the Greek government and the troika were successfully completed this morning,” Greek Prime Minister Lucas Papademos’s office said in an e-mailed statement today in Athens. “Political leaders have agreed with the result of those negotiations. Therefore there is a general agreement in the context of the new program ahead of tonight’s euro group meeting.” The statement didn’t include any details.
The accord came after Greek Finance Minister Evangelos Venizelos arrived in Brussels for an emergency meeting of euro- region finance ministers to discuss the 130 billion-euro ($173 billion) lifeline and a debt swap that will impose a loss of about 70 percent for investors.
“Some key pieces are falling into place,” Holger Schmieding, chief economist at Berenberg Bank in London, said in an e-mailed note before the decision was announced. “Barring any last minute hitch, Europe may soon have defused the Greek issue for a while.”
Greece faces a 14.5 billion-euro bond payment on March 20 and is struggling to secure financing to avert a collapse of the economy that could spark a new round of euro-area contagion.
Stocks, Euro Rise
The euro increased 0.3 percent to a two-month high of $1.3302 as of 11:05 a.m. in New York. The Stoxx Europe 600 Index advanced 0.2 percent to 263.58 at 4:30 p.m. in London. The benchmark measure has rallied 23 percent from last year’s low and 7.8 percent this year on mounting optimism that euro-area policy makers will contain the region’s debt crisis.
Christos Protopapas, a spokesman for the Pasok socialist party, said parliament will vote on the accord in two steps starting this weekend.
“The Greek Parliament will convene to vote on an agreement on the private sector involvement, bank recapitalization and authority for the prime minister and finance minister to sign the new memorandum at the weekend,” Protopapas told reporters today. “The implementation law, which will include the new measures, will be voted on in the next 10 to 15 days.”
Pension Cut Discord
Talks over austerity measure between Papademos, who is the interim prime minister, and the so-called troika -- the European Commission, European Central Bank and International Monetary Fund -- had stalled over 300 million euros of pension cuts.
Greek Deputy Labor and Social Security Minister Yiannis Koutsoukos resigned in protest over the austerity measures, according to a statement sent from the Pasok socialist party member’s office.
Creditors met in Paris today over a deal in which they would accept an average coupon of as low as 3.6 percent on new 30-year bonds in the exchange. The aim of the transaction is to reduce the country’s debt burden to 120 percent of gross domestic product by 2020 from 160 percent last year.
A formal offer for the debt swap must be made by Feb. 13 to allow all procedures to be completed before the March 20 bond comes due, Venizelos has said. The tussle in Athens threatened to hold up the debt swap that will slice 100 billion euros off more than 200 billion euros of privately-held debt.
ECB Rates Unchanged
The European Central Bank today left the benchmark interest rate at a record low of 1 percent.
ECB President Mario Draghi, speaking to reporters in Frankfurt, declined to comment on whether the ECB will use its own Greek bond holdings in any swap to help alleviate the nation’s debt burden. “I cannot say anything on how our holdings of Greek bonds will be treated,” he said.
A Greek decision has hung in the balance for almost a week as lenders demanded officials sign on to measures ranging from a reduction in the minimum wage and lower pensions, to immediate job cuts for as many as 15,000 state employees.
Greece’s unemployment rate in November rose to 20.9 percent from 18.2 percent in the previous month, according to an e- mailed statement from the Athens-based Hellenic Statistical Authority today.
Vodafone Group Plc (VOD), the world’s biggest mobile-phone company, is moving cash from Greece into the U.K. “every evening,” mirroring efforts by others companies such as GlaxoSmithKline Plc (SAN) and WPP Plc (WPP) to hedge against the European debt crisis, Chief Financial Officer Andy Halford said on a conference call today.
Greek Creditors Meet
The Institute of International Finance held the meeting of private Greek creditors in Paris today to go over technical matters so the debt swap could be implemented quickly if an accord between Greece and troika was reached, two people familiar with the matter who declined to be identified because talks are private, said before the discussions.
While the prime minister and party chiefs have agreed to make further cuts this year equal to 1.5 percent of gross domestic product, political leaders are worried about the effect on voters of further cuts in wages and pensions ahead of elections due as early as April. Unions, which went on strike this week, have derided the conditions as “blackmail.”
Greece will pledge permanent spending cuts, including lower pension payments and a 20 percent reduction in the minimum wage, as the economy contracts this year at a faster pace than originally estimated, according to the draft of the agreement discussed at the meeting with party heads, and obtained by Bloomberg News.
The troika argues such moves are needed to boost competitiveness. Those opposed say the cuts would deepen the country’s recession, now in its fifth year.
Greece’s private-sector union GSEE has called a 48-hour strike beginning tomorrow, according to an e-mailed statement, sent from the Athens-based union. ADEDY, the public-sector union, is also participating in the 48-hour strike, union spokeswoman Despina Spanou said by telephone.