5.6.11

Greece to impose deeper austerity for new rescue


Greece is set to impose a deeper bout of austerity on its struggling economy and promise to speed up a privatization drive in return for a new international bailout to avoid a debt default.
Prime Minister George Papandreou Friday will present his side of the deal, a medium-term budget plan, when he meets the chairman of euro zone finance ministers -- the people who must stump up much of the planned new funding along with the IMF.
Senior euro zone officials meeting in Vienna agreed in principle to a new three-year program for Greece to run until mid-2014, a source close to the negotiations said.
This would effectively supersede a 110 billion euro ($159 billion) rescue Greece agreed with the European Union and IMF a year ago.
But whereas taxpayers have so far borne the brunt of rescuing Greece and fellow euro zone members Ireland and Portugal, the new deal would involve some participation of private sector investors, the source told Reuters.
Some European politicians have argued that investors who bought Greek government bonds will have to share that burden, perhaps in the form of cutting the value of their debt.
The European Central Bank has fought such an idea, fearing this could provoke a crisis among European banks which hold large sums in Greek debt, and lead to a violent reaction on financial markets far beyond Greek borders.
However, participation of private sector investors in the new deal would be limited to avoid triggering a "credit event," the source said, without providing any figures.
Athens, which is struggling to lower its budget deficit, let alone its 340 billion euro debt mountain, hasn't got a done deal yet. Anything agreed by the officials in Vienna must be approved by the euro zone finance ministers, some of whom represent electorates which are hostile to any more aid to Greece.

http://www.reuters.com/article/2011/06/02/us-greece-plan-idUSTRE7511YD20110602

No comments: