 |
EU leaders reach deal to rescue Greece, investors relieved
Polish Prime Minister Donald Tusk told reporters earlier that the aid, which would amount to the first bailout of a euro zone members since the currency was created 11 years ago, was likely to come in the form of loans. “It could be voluntary loans from member states. That seems to be the best option,” Tusk said.
A Spanish source told Reuters that details of the aid would be worked out at the latest by Tuesday, when EU finance ministers are due to hold a meeting.
“The general idea is to have broad European assistance with a tighter focus of assistance by euro zone countries,” the source said, requesting anonymity. The European Commission would have a supervisory role over the aid deal.
European leaders are keen to prevent Greece’s woes from spreading to other highly-indebted euro-zone members like Portugal or Spain, plunging the currency area into a bigger crisis that could reverberate around the globe. But until this week, they have avoided speaking openly about the aid, fearful that might ease pressure on the government in Athens to enact tough austerity measures needed to bring down a deficit that soared to 12.7 percent of gross domestic product (GDP) last year -- more than four times EU limits.
Athens needs to borrow 53 billion euros ($75 billion) this year to cover its deficit and refinance debts. Its debt pile is expected to grow to more than 290 billion euros this year and the cost of servicing that debt has soared as bond markets have punished Greece for its financial profligacy.
The euro jumped versus the dollar after Van Rompuy announced a deal following the meeting of key euro zone leaders, also attended by Spanish Prime Minister Jose Luis Rodriguez Zapatero and Eurogroup Chairman Jean-Claude Juncker. The premium investors demand to hold Greek government bonds rather than benchmark Bunds tightened 10 basis points on the news to 266 basis points, 17 basis points tighter on the day.
Greek spreads have narrowed from more than 400 basis points over Bunds in two weeks as momentum towards a bailout has gathered pace. But markets remain wary amid uncertainty over the terms of the aid for Greece and how it might affect investor sentiment towards the 16-nation euro zone. The euro stood at $1.3740 at 1200 GMT.
Even with EU support, the Greek government faces a daunting challenge to consolidate its budget and restore confidence in an economy whose imbalances were exacerbated by the economic and financial crisis. Greek public sector union ADEDY said on Thursday it would join in a Feb. 24 strike called by private sector union GSEE to protest government austerity measures, underscoring the risk that social unrest could hamper the Greek consolidation drive.
Germany and France
Germany and France were expected to take the lead in support as Italy and Spain -- the other two big economies in the euro zone -- are themselves under financial pressure.
Various options have been under discussion, including Germany buying Greek government bonds via a state-owned bank, direct budget support via the early release of EU structural funds or even issuing euro-zone bonds or turning to the IMF. An EU government source said the aid would draw on the expertise of the European Central Bank and the International Monetary Fund, but would not involve IMF funds.
|
||||||||||||||||||||||||||||||||||||||||||||||||||
| AMANDA PAUL |  |
||
| Ukraine: a lost country | |||
| MÜMTAZER TÜRKÖNE |  |
||
| The 52nd anniversary of May 27 | |||
| ABDULLAH BOZKURT |  |
||
| Turkey and Mexico: Distant yet so close | |||
| BERİL DEDEOĞLU |  |
||
| Yemen and beyond | |||
| ARZU KAYA URANLI |  |
||
| On Memorial Day a few words to make your day memorable | |||
| ABDÜLHAMİT BİLİCİ |  |
||
| Google kidnaps Gül! | |||
| CUMALİ ÖNAL |  |
||
| Critical months for Egypt | |||
| DOĞU ERGİL |  |
||
| Qualities of power | |||
| İHSAN YILMAZ |  |
||
| The Egyptian elections, Islam and Islamists | |||
| EMRE USLU |  |
||
| Operational errors | |||
| MARKAR ESAYAN |  |
||
| There is need for a new initiative | |||
| JOOST LAGENDIJK |  |
||
| Europe can’t have it all. Or can it? | |||
| HASAN KANBOLAT |  |
||
| Are Russian tourists being discouraged from visiting Turkey? | |||
| MELİH ARAT |  |
||
| Handmade | |||
| KLAUS JURGENS |  |
||
| Back to the ’80s | |||
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||
