By Eleni Chrepa and Tom Stoukas - Feb 9, 2012 7:08 PM GMT+0700
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Greece's Finance Minister Evangelos Venizelos speaks during a press conferense in Athens, Greece, on Jan. 31, 2012. Photographer: Aris Messinis/AFP/Getty Images
Feb. 9 (Bloomberg) -- Wolfgang Munchau, president and co-founder of Eurointelligence, talks about the Greek debt negotiations, where talks have stalled over the issue of pension cuts and officials from the European Union and the International Monetary Fund have given Greece 15 more days to identify measures totaling 300 million euros. Munchau speaks from Brussels with Maryam Nemazee on Bloomberg Television's "The Pulse." (Source: Bloomberg)
Feb. 9 (Bloomberg) -- Ira Jersey, an interest-rate strategist at Credit Suisse in New York, talks about the Greek debt crisis and the European Central Bank and Bank of England monetary policies. Jersey speaks with Sara Eisen on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Greek Finance Minister Evangelos Venizelos headed to Brussels today as politicians in Athens narrowed their differences to the single issue of pension cuts needed to secure a 130 billion euro ($172 billion) bailout.
Talks stumbled over pensions as European Union spokesman Amadeu Altafaj said he couldn’t confirm reports the EU gave Greece 15 more days to identify measures totaling 300 million euros. “No one seems to be aware of such an extension,” he told reporters today in Brussels before today’s emergency finance ministers’ meeting starting at 6 p.m.
“There are issues outstanding that must be resolved,” Venizelos told reporters in Athens today after a meeting with Prime Minister Lucas Papademos and EU and International Monetary Fund officials that ended just before 6 a.m. “As the prime minister said, there is agreement on all the issues bar one.”
The latest hitch came after six days of talks as the political parties battled to complete a package that’s been on the table since July. 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 contagion in the euro area.
European stocks rose for the first time in four days as the Stoxx Europe 600 Index added 0.1 percent at 12:52 p.m. in Berlin. The euro was down 0.1 percent to $1.3251.
Defusing ‘Greek Issue’
“Some key pieces are falling into place,” Holger Schmieding, chief economist at Berenberg Bank in London, said in an e-mailed note today. “Barring any last minute hitch, Europe may soon have defused the Greek issue for a while.”
A Greek deal would reinforce the reduction of contagion risks as investors discriminate between “small countries with serious problems (Greece, Portugal) and much bigger countries with smaller problems (Italy, Spain),” Schmieding said.
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.
Agreement
Papademos and the leaders of the three parties supporting the government “agreed on all the points of the program with the exception of one which requires further elaboration and discussion” with the lenders, according to an e-mailed statement from the premier’s office in Athens. “This discussion will occur immediately so that it can be completed in light of the meeting of euro area finance ministers” today.
With Greek leaders not planning any major appearances today, discussions over Greece’s fate will shift to Brussels and Frankfurt. In the Belgian capital, ministers must decide whether Greece has already done enough for governments to give a green light to a bailout package needed to stave off an economic collapse. Venizelos said he hoped they would take a “positive decision.”
In Germany, European Central Bank President Mario Draghi will be grilled on the ECB’s role in any new bailout at a press conference after its monthly interest rate decision. Draghi meets reporters at 2:30 p.m. local time.
Not Much Time
Greece doesn’t have much time left to arrange financing for its bond payment and avoid “outright default,” said Thomas Mayer, chief economist at Deutsche Bank AG.
“If they don’t have the money in the account at the time the payment is due, then they really default,” Mayer said yesterday in a radio interview on “Bloomberg -- The First Word” with Ken Prewitt. “Time is of the essence. I think we have maybe one, maybe two, maybe three more days but that’s it.”
A Greek decision has hung in the balance for almost a week as lenders demand 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.
A government official, who declined to be identified, said Antonis Samaras of the New Democracy party, Pasok party leader George Papandreou and George Karatzaferis of the Laos party all submitted alternative proposals to avoid pension cuts.
Pension Cut Alternatives
The leaders have effectively agreed on all the issues except for that of cuts to pensions, Panos Beglitis, a spokesman for the Pasok socialist party, told reporters after the meeting. He said his party was opposed to cuts in main pensions and that talks revolved around finding alternatives to make up for a 300- million euro shortfall.
The tussle in Athens threatens to hold up a vital element of the plan: a debt swap that will slice 100 billion euros off more than 200 billion euros of privately-held debt. The rescue blueprint includes a loss of more than 70 percent for bondholders in the voluntary debt exchange as well as loans that will probably exceed the 130 billion euros now on the table.
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. Parliament may be called to vote on the terms of the writedown on Feb. 12, state-run Athens News Agency reported on Feb. 7, without saying how it got the information.
‘Last Minute Deal’
“History tells us that a deal in Greece will be reached at the last minute,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. “A lot of indications show they are heading in that direction even though there are endless delays.”
Karatzaferis, the head of Laos, the smallest of the parties supporting Papademos, may yet hold up an agreement even if the pension issue is resolved. He said he wanted assurances that the measures were legal.
Karatzaferis “expressed serious reservations,” the premier’s office said in its statement after the meeting.
Private creditors plan to meet in Paris today to discuss the deal, which is contingent on the country agreeing to the aid package from European and international officials.
The Institute of International Finance is holding the meeting to go over technical matters so that if an accord between Greece and the troika is reached, the debt swap could be implemented quickly, said two people familiar with the matter who declined to be identified because talks are private.
April Elections
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.”
“During these difficult times, we must look at ordinary people, at the pensioner,” New Democracy’s Samaras said. “I don’t have the right not to do it, I don’t have the right not to negotiate hard.”
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.
Deepen Recession
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.
Guarantees from leaders such as Samaras, who is ahead in opinion polls, are key to securing the funds. International lenders want assurances that whoever wins the next election will stick to pledges made now to receive financing.
Samaras’s party has 31 percent support from voters, according to a Public Issue poll published yesterday, compared with 8 percent for the socialist Pasok party, the biggest in the current parliament. The survey of 1,002 Greeks showed a growing number want elections immediately, and waning support both for Papademos and the parties that back him.
Greece’s private-sector union GSEE has called a 48-hour strike on Feb. 10-11, according to an e-mailed statement, sent from the Athens-based union today. ADEDY, the public-sector union, is also participating in the 48-hour strike, union spokeswoman Despina Spanou said by telephone.
To contact the reporters on this story: Eleni Chrepa in Athens at echrepa@bloomberg.net; Tom Stoukas in Athens at astoukas@bloomberg.net
To contact the editors responsible for this story: James Hertling at jhertling@bloomberg.net; Stephen Foxwell at sfoxwell@bloomberg.net
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