Greece seeking new bailout deal by late August

AP News
Posted: Jul 12, 2011 2:07 PM
Greece seeking new bailout deal by late August

Greece's finance minister on Tuesday said the country wants the European Union to conclude a second rescue loan deal by the end of August, as volatile international markets fretted over the vulnerability of other eurozone members to the escalating debt crisis.

Debt-ridden Greece is surviving on euro110 billion ($154.6 billion) bailout loan program from EU countries and the International Monetary Fund, but remains shut out of bond markets and will need substantial additional help to cover financing gaps next year.

"The overall program ... must be completed by the end of August," Finance Minister Evangelos Venizelos said.

"We, Greece, are ready to enter a new program ... We also want full coverage, not just for the country's fiscal requirements, but for the stability of Greece's financial and banking system."

Venizelos said Athens hoped the new program could be approved by European parliaments before Greece gets its next rescue loan installment in mid-September.

European leaders remain split on the nature of a new bailout agreement and how private holders of Greek bonds could contribute to easing Greece's payout schedule.

Credit ratings agencies _ which have relegated Greek bonds to junk status _ have warned they could consider a voluntary deferment of Greek debt as a form of default.

But Venizelos insisted that rating agency classifications should not be considered real financial events.

"A selective default is not a real event. In effect, it is an assessment, a rating level," he said. "We must not turn a perception into a self-fulfilling prophecy.

Greece, which narrowly avoided a debt default earlier this month, has embarked on a punishing new round of austerity measures after missing its deficit-cutting targets so far in 2011. The new measures were also set as a condition for a second bailout.

Venizelos pledged to meet fiscal targets this year, with a view to achieving a primary surplus in 2012, and described revenue-boosting as "an existential need" for the country.

Eurozone finance ministers failed to finalize details of a second financial rescue package for Greece in a meeting Monday.

In an open letter to Jean-Claude Juncker, chairman of the eurogroup, Greek Prime Minister George Papandreou urged swifter and bolder action if contagion is to be avoided.

"I am now convinced, after fourteen months, that no matter what Greece does _ and we have proven ready to live up to our responsibilities _ if Europe does not make the right, collective, forceful decisions now, we risk new, and possibly global, market calamities due to a contagion of doubt that will could engulf our common union," he said. "Strong and visionary European leadership is needed."

Though current market worries are centering on Italy and Spain, Greece's future remains a real cause for concern. Fears that Europe's debt crisis could engulf Spain and Italy have weighed on stock markets and the euro. Shares on the Athens stock market closed down 0.19 percent at 1,216.51, recovering from heavy losses earlier in the day on a pledge by Italy to fast-track its own austerity program.

Braving the market turmoil, Greece on Tuesday raised euro1.625 billion ($2.28 billion) in an auction of 26-week treasury bills. Though the rate the country had to pay fell to 4.9 percent from 4.96 percent at an equivalent auction a month or so back, Greece is still having to cough up a hefty premium to what other countries using the euro are having to pay.

The country is still locked out of long-term debt markets by exorbitant borrowing costs, with the interest demanded for 10-year bonds remaining above 17 percent.