European Union nations are working
on a contingency rescue plan for
Greece
to be funded by its member governments, according to two people briefed
yesterday in
Berlin
by an EU official.
The briefing, coming the day
Greece
sold 5 billion euros ($6.8 billion) of bonds, underscores the balancing act
facing European officials as they prod Greek Prime Minister
George Papandreou to cut the biggest EU budget deficit
without their committing funds. Papandreou, who today began meetings in
Luxembourg
,
Berlin
,
Paris
and
Washington
, has to contend with protests at home against his tax increases and
spending cuts.
“We’re telling financial markets:
Look out, we’re not abandoning
Greece
,”
Luxembourg
’s
Jean-Claude Juncker,
who heads the group of euro-area finance ministers, told
Germany
’s
Deutschlandradio today. He praised
Greece
’s
“ambitious” deficit-reduction plan and said “I don’t assume outside financial
help will become necessary.”
Should financial assistance become
required, it would be tied to stringent conditions, Juergen Kroeger, who heads
a European Commission department that oversees national economies, told the
Berlin meeting, said the people. Kroeger gave no sign that aid was imminent, said
the people, who spoke on condition of anonymity because the briefing of
lawmakers, academics and executives in a parliamentary office building was
private. Kroeger was not available for comment today when his office was
contacted by phone.
‘Grabbed the Bull’
The briefing backs up comments
made last week by German lawmakers who said the EU was developing a plan to
offer Greece about 25 billion euros in emergency aid, even as German Chancellor
Angela Merkel and other leaders say Greece has done
enough to rein in the deficit and reassure financial markets.
Papandreou “grabbed the bull by
the horns” with his announcement of 4.8 billion euros of additional deficit
cuts, Merkel told reporters in
Munich
today. The
Greek program is showing results and the bond issue “gives us cause for
optimism.”
The 6.25 percent bonds
Greece
sold yesterday rose to about 99.4 cents on the euro to yield 6.32 percent,
compared with an issue price of 98.94 cents, according to EFG Eurobank Trading
prices on Bloomberg. The risk premium that investors demand to buy Greek bonds
over comparable German debt, the European benchmark, fell 4 basis points to 293
basis points.
Papandreou met Juncker in
Luxembourg
today and was due to hold talks with Merkel then brief reporters in
Berlin
at
6:30 p.m.
He sees French President
Nicolas Sarkozy on March 7.
‘Political Support’
Merkel said March 3 that her
meeting with Papandreou won’t be “about aid commitments,” a point reiterated
today by her chief spokesman,
Ulrich
Wilhelm, who said the talks “will of course be about political support.” Political
backing “is an important signal to financial markets, which are monitoring the
situation in
Greece
closely,” he said in
Berlin
.
In
Greece
today, labor unions shut down transport and state workers walked off the job in
protest as parliament passed the austerity package. Police scuffled with
protesters and fired tear gas at demonstrators outside the parliament building
during a protest march. Inside, lawmakers backed the government, helping it
meet its pledge to reduce the deficit by 4 percentage points from 12.7 percent
of gross domestic product.
Tram, rail, subway and bus
services shut in
Athens
and other cities as employees rallied against the cuts to bonuses and
holiday payments. Air traffic controllers held a four-hour walkout, forcing the
cancellation of all 58 flights to and from
Athens
International
Airport
between
midday
and
4
p.m.
and the rescheduling of another
135, according to a spokeswoman.
‘What We Need’
Greece
“is not looking for money” from Merkel, Papandreou told
Germany
’s
Frankfurter Allgemeine Zeitung newspaper in an interview published today. “What
we need is the support of the EU” to borrow at lower interest rates, he said.
In a bond sale that marked a test
of investor response to Papandreou’s austerity measures,
Greece
yesterday sold 5 billion euros of 10-year bonds. Investor demand when the order
book closed exceeded 16 billion euros, according to
Petros Christodoulou, head of
Greece
’s
debt agency.
In the EU, there’s “solidarity
that can be activated should financial markets fail to note that
Greece
is taking determined action,” Juncker said. “One has to say loud and clear: the
Greeks won’t be left alone because the Greeks deserve not to be left alone
after having made these tremendous efforts in the past weeks.”
European Central Bank President
Jean-Claude Trichet told Belgian RTBF radio that the Greek
government’s decision was “courageous, but absolutely necessary,” with polls
showing a “very large majority” of Greeks backing the government’s plans. French
Finance Minister
Christine
Lagarde praised the “courage”
of the measures decided by Papandreou.
(
from
Bloomberg)