Greek voice can markets ease, give, even if only temporarily

4:00 AM Greek, markets, temporarily, voice No Comments

By Caroline Valetkevitch, Reuters
4: 27 Pm EDT updated: NEW YORK--the elections on Sunday per bailout showed early results from Greece parties are on course to win a narrow majority, which can markets some respite, but Coalition majority looks set be narrow and may be missing necessary stability to enact painful reforms.

Regardless of the result, Europe's problems are long time not yet been completed, as the debt crisis that threatens to devour the larger economies of Spain and Italy.

All characters of the tensions in markets on Monday morning and investors will look for action by central banks of the world which are prepared according to officials to intervene if trade is turbulent.

Enters Greece the choice as investors see it, the future of the country in the euro area and possibly the future of the currency block itself may be.

Keep the Greek conservative new democracy party and Socialist PASOK, and large back a EU/IMF rescue package, Greece before the bankruptcy, looked set to secure a narrow majority in Parliament together. SYRIZA, the leading left-wing party committed to tear the terms and conditions for the bailout, conceded defeat.

"they will probably try form coalitions and the real question is, with the horse trading it is how stable?", said Doug Roberts, chief investment strategist at channel capital Research.com in Shrewsbury, New Jersey. "But now it's more like enter the can of down the road." "Either way you are not talking about a stable situation."

An official vote projection showed new democracy under 29.5 percent of the vote, with SYRIZA in second place with 27.1% and PASOK with 12.3 percent of third parties.

For 50 places bonus given to the party which comes first, the result means 300 seats 128 for 33 seats in the Parliament for PASOK and new democracy.

Roberts said whether central banks intervene depends on the markets next week. "If the markets start to the South I think he is forced," he said.

Euro hit of one of the few markets trade shortly after the official election projections in Greece a three-week high against the dollar in the early Australasian trade rose to around $1.2730 according to Reuters information from approximately $1.2655 late in New York on Friday.

But markets had tended to positive policy developments late Sunday and early Monday only to quickly undo to respond. So was it last weekend, after the EU a 100 billion euro bailout for Spanish banks announced.

Weeks of concern about the possible outcome of the Greek election have prompted a number of central banks to prepare the market problems.

Officials from the Group of 20 central banks in major economies are willing to take in order to reassure the markets, the outcome of the Greek elections should create a market storm, told of Reuters.

Among them President said European Central Bank Mario Draghi was the ECB to fund ready and viable euro zone bank that gets into trouble. The Bank of England on Thursday announced a $155 billion (?100 billion) offer of the loans to banks.

Group of 20 leading kick-off a two-day summit in Mexico on Monday and the rest of which is likely to week to not be quiet.

The Federal Reserve is a policy statement by release on Wednesday at the end of their two-day meeting and the steady stream of debt warnings and downgrades is likely to continue.

Another sign of investor nervousness was the CBOE volatility index <.VIX>, Wall Street fear gauge, for much of Friday as stocks rose, although the VIX closed lower. An inverse relationship usually have stocks and the VIX.


Many investors have tried, prepare for the worst.

"People attacking their positions in the last two weeks on the road in this weekend, secure were have", said Alec Levine, a derivatives strategist at NEWEDGE Group SA in New York.

"No matter what happens (this) week, we return to a massive game of chicken between the newly elected Greek Government, who can be, and the EU, specifically Germany."

THE FED PROVIDED

Despite the fears, shares ended the week on a positive note, marking a second week of gains. The benchmark standard & Poors is now 6.8 percent for 2012, but still good for the highest of the year index <.SPX>.


Part of what has optimism investors has spurred in recent weeks was the hope that would be the fed and other central banks, more economic stimulus. There is still speculation about, whether the Fed will engage in a third round of quantitative easing.

"We believe that QE3 expectations in the market drive one way or other," said Omar Aguilar, chief investment officer for equities at Charles Schwab Corp., in San Francisco.

But the fact that the Fed has changed no current policy could mean the economic data decision makers see is "not as bad as everyone thinks," said Aguilar.

Before the vote Russell indexes also said that certain events in Greece could mean changes in their indexes their rule "financial crisis" through implementation. Their indexes of Russell include global index.

ON RATINGS WATCH

Add to investor nervousness was a whole series of the last ratings cuts.

Under the recent Fitch Ratings on Friday downgraded Egypt's sovereign credit rating deeper into junk status. On Thursday, Egan-Jones cut sovereign creditworthiness of France.

Many investors see this trend continue as agencies try to measure the impact of the euro and other issues on the global economy.

"We are likely to see more of them", said Peterson.

Below the CNBC Sue Herrera forecasts, what next week are likely top business and financial stories.

Copyright 2011 Thomson Reuters.

Read More

Greek Bank shares leap ahead of important elections

8:00 AM ahead, elections, Greek, important, Shares No Comments

U.S. traded shares of the National Bank of Greece (NBG) is 7% in trading Friday, just a few days before an election of the country which for the Greek economy and ultimately the global financial system could have a huge impact.

The Greek parliamentary elections Sunday are displayed as a referendum for whether Greece as part of a plan to rescue the country from an enormous debt burden will accept austerity measures imposed or whether it will reject thrift and probably leave the euro zone.

According to the Greek law, not polls for weeks before an election can be published which means that the result of the vote is difficult to handicap. So the question is: why traders make bets before as a mysterious and potentially calamitous event are?

The movement in the stock could indicate that market participants think that the Greek people is a Government to choose which supports Greece bailout and strict agreements with other countries in the euro zone (something that probably the companies in the euro area would keep).

Read More

Greek parliament approves health cuts

2:00 PM approves, Greek, health, parliament No Comments

ATHENS — The Greek parliament approved an extension of pharmacy opening hours and cuts to drugs spending on Thursday as part of a package of healthcare reforms agreed in return for last week's 130 billion euro international bailout deal.

The early morning vote, the final significant element in the package of so-called "prior actions" which Athens had promised before this week's European Union summit, follows Tuesday's approval of 3.2 billion euros in budget cuts and a steep reduction in the minimum wage.

Deputies voted 213 to 58 to approve the package, with 17 abstaining in a result which was generally expected after Greece's two biggest parties backed the package.

Greece has been under heavy pressure to match its repeated reform and savings pledges with concrete action after increasing skepticism about the ability of Prime Minister Lucas Papademos' government to push through unpopular changes.

"The Greek authorities have to deliver," European Commissioner for regional policy Johannes Hahn told Reuters in an interview.

There has been growing concern that the repeated doses of austerity will deepen a recession now in its fifth year and make it impossible to cut a public debt burden amounting to 160 percent of gross domestic product.

As well as extending pharmacy hours, an issue which sparked a revolt among lawmakers who rejected the proposal in January, Wednesday's vote will also limit spending on drugs by state pension funds and mandate generic drugs prescriptions to cut costs.

Greece spends some 25 billion euros a year, roughly 10 percent of its GDP, on health and controlling a bloated public health system, has been a priority.

Resistance to the measures among powerful medical lobbies has been fierce however with posters attacking Health Minister Andreas Loverdos as a "gravedigger" plastered over many pharmacies in recent days.

Cheaper generic drugs account for just 18 percent of the market in Greece, one of the lowest levels in the European Union, compared with 80 percent in Germany.

The latest measures aim to lift the Greek total to 50 percent, in line with the rest of Europe.

Wednesday's vote does not impose the kind of pain on ordinary Greeks that the previous cuts have done but it is intended to attack waste in the frequently corrupt and inefficient public health system.

Popular protests against the austerity measures, which exploded into violence earlier this month, have been muted in recent days with many Greeks still shocked by the images of burning buildings seen during the riots.

A small demonstration in front of the parliament on Wednesday broke up after heavy rain began but a transport strike is set to disrupt trains and buses on Thursday and unions have pledged further action in the coming weeks.

Copyright 2012 Thomson Reuters.

Read More

Greek debt pact is far from a done deal

1:05 AM Greek No Comments

Eurogroup president Jean-Claude Juncker and International Monetary Fund Managing Director Christine Lagarde celebrate the latest deal to bail out Greece. Their jubilation may be premature.

By John W. Schoen, Senior Producer

In their jubilant celebration over the latest agreement to solve Greece's debt debacle, European officials forgot to check with two important groups: the Greek voters and the bondholders who lent Athens the money it now says it can’t pay back.

The agreement once again buys the eurozone some time. Greek officials agreed to deeper spending cuts of 325 billion euros ($430 billion) and stricter budget oversight by the European Union. They also agreed to ask investors to accept less than 50 cents on the dollar on Greek bonds they hold.

If all goes well, Athens will once again dodge bankruptcy with the infusion of the latest,  $172 billion (€130 billion) installment in the ongoing bailout of the rapidly contracting Greek economy.    

But the ink was barely dry before the top official of the International Monetary Fund, which has to sign off on the payment, gently reminded the parties that two important conditions still need to be met.

“As soon as the prior actions agreed with the Greek authorities are implemented and adequate financial contribution from the private sector (bondholders) is secured, I intend to make a recommendation to our Executive Board regarding IMF financing to support a program,” Christine Lagarde, Managing Director said in a statement.

The first condition -- making those $430 billion in budget cuts stick -- is a tall order.

For the past four years, the Greek economy has been in a tailspin, shrinking by 20 percent as repeated rounds of government spending cuts imposed by European officials have stifled economic growth, further shrinking the country's tax base and fueling a vicious downward spiral. The Greek unemployment rate has more than doubled during that time; today, roughly half of Greeks aged 15- to 24-years-old are out of work. Each round of spending cuts has only intensified the economic pain on Greek citizens.

Greek voters will get a chance to weigh in on the deal in April, when parliamentary elections are scheduled. Candidates running on an “austerity” platform can expect an uphill battle in a country mired in a deep depression.  Earlier this month, riots flared in Athens and other Greek cities as thousands joined protest rallies, burning dozens of buildings and looting businesses. On Sunday, thousands of demonstrators in Athens staged a repeat anti-austerity protest.

The architects of Tuesday’ bailout deal are hoping that Greek voters believe continued membership in the European Union is worth the pain of the austerity measures being imposed as a condition for remaining part of the economic club.

The expectation is that leaders of the two main parties, the center-left Panhellenic Socialist Movement (PASOK) and the conservative New Democracy (ND), will win re-election and form a coalition that enforces spending cuts European officials are demanding.

“Certainly (the parties) will publicly voice their disgust with the program, but privately they will continue to go along with it,” said Douglas Borthwick, a currency trader at Faros Trading.

But that scenario may prove overly optimistic. Support for the two main parties is at historic lows, providing an opening for smaller left-leaning parties opposed to the spending cuts, according to IHS Global Insight economist Diego Iscaro and country analyst Blanka Kolenikova.

“If the current polls prove true when the general election is held, neither the ND nor the PASOK would secure sufficient support to create a majority government,” they wrote in a note to clients Tuesday. “The winning party would be then forced to team up with smaller, radical parties, which would bring uncertainty and instability mid-term.”

Some observers doubt Europe’s demands are possible -- no matter who is elected.

“The package is based on unrealistic economic assumptions and will be no more successful than the first deal,” said Ben May, an economist at Capital Economics. “Accordingly, Greece or (European officials) may still decide to terminate the bail-out within months.”

The bailout bargain faces another hurdle well before the election, when Greece faces a March 20 deadline to come up with a 15 billion euro ($20 billion) bond payment it can’t make. To head off that default, Tuesday’s bailout bargain calls for Greece to tell bond holders they’ll have to “volunteer” to accept less than half of what they're owed.

Though Greece has not yet technically defaulted, investors fearing they won’t get their money back have already bid down the value of more than 400 euros of government debt outstanding.  

“For some reason, this is not officially being labeled a ‘default’ even though more than 100 billion euros of Greek debt are being written off by private bondholders,” said David Rosenberg chief economist at Gluskin Shiff.

The latest bond write down demanded by Tuesday’s deal would inflict even heavier losses than past proposals. Much of that “haircut” will be taken by European banks, who are now borrowing at record low rates from the European Central Bank. The hope is that those low rates will help them offset the hit they’ll take when Greece pays them back less than it originally promised.

But those losses also will be inflicted on private investors, including hedge funds who have been gambling that the government won't come up with the money to pay them back. They've been betting against full payment with so-called “credit default swaps” -- a kind of insurance policy that pays off when a borrower defaults.  That leaves them little incentive to agree to the deal. 

If too many private bond holders refuse to take the haircut, those credit default swaps could be triggered -- with largely unknown consequences. In 2008, the cascading impact of credit default swaps sparked by the collapse of Lehman Brothers touched off a global financial panic.

So until Greek voters and bond holders agree to go along, Tuesday’s long-awaited grand bargain may turn out to be just one more in a series of partial solutions that failed to resolve the crisis.

“All the authorities have been able to do is delay default by a few weeks, perhaps a few months at best,“ hedge fund manager Dennis Gartman wrote in his investor newsletter. “Greece will default, but perhaps not under the present government in power.”

The winning party would be then forced to team up with smaller, radical parties, which would bring uncertainty and instability mid-term.

Read More

Greek leaders agree on austerity pact for bailout

12:58 AM agree, austerity, bailout, Greek, leaders No Comments

Greek political leaders have reached a deal with EU and IMF lenders on reforms required in return for a new bailout, the office of Prime Minister Lucas Papademos said in a statement on Thursday.

"The consultations between the government and the troika on the issue which remained open for further discussion were successfully completed this morning. The political leaders agreed on the outcome of these talks," Papademos' office said in a statement.

"There is broad agreement on the content of the new programme ahead of today's Eurogroup meeting," the statement said.

Financial markets have been awaiting the deal which would allow Greece to avoid a disorderly default that could disrupt global markets.

Earlier, a spokeswoman for the office of Greek Prime Minister Lucas Papademos said the agreement with the majority Socialists and the conservatives will allow alternative cuts to those rejected early Thursday during a meeting of the three coalition party leaders.

She spoke on a customary condition of anonymity.

Although all the other cuts demanded by Greece's eurozone partners and the International Monetary Fund were approved, party leaders had balked at new pension cuts.

Reuters and The Associated Press contributed to this report.

Read More

Greek PM convinces cabinet to push referendum deal ahead

9:16 PM ahead, cabinet, convinces, Greek, referendum No Comments

ATHENS — Greek Prime Minister George Papandreou fought off a barrage of criticism to win the backing of his cabinet Wednesday to push ahead with a referendum the government said would take place as soon as possible on a European Union debt bailout deal.

How your car could testify against you Goodbye 'bunga bunga', hello prison for Berlusconi? NBC News: Paterno contacts criminal defense lawyer Updated 105 minutes ago 11/11/2011 2:31:37 PM +00:00 Ai Weiwei tackles tax bill, with Chinese help Helping women soar in tough economy Are there bogus charges on your phone bill? Good buddies: Truckers transport rescued animals

Some of his party lawmakers called for him to quit for jeopardizing Greek euro membership with his shock decision to call a popular vote, a move that pummeled the euro and global stocks, but the cabinet support at least gives him a stay of execution before a confidence vote in parliament Friday.

"The referendum will be a clear mandate and a clear message in and outside Greece on our European course and participation in the euro," Papandreou told the seven-hour cabinet meeting, according to a statement released by his office.

Stocks aim lower with Italy at crisis point

"No one will be able to doubt Greece's course within the euro."

After the apparent show of unity at home, Papandreou will later face the leaders of France and Germany, who summoned him for crisis talks in Cannes, before a G20 summit of major world economies, to push for quick implementation of the bailout deal.

Whatever the result of the referendum, Papandreou's gamble guarantees long weeks of uncertainty just when the 17-nation currency area was desperate for a period of calm to implement remedies agreed last week to overcome its sovereign debt crisis.

"This announcement took the whole of Europe by surprise," French President Nicolas Sarkozy said in a rare televised address on the steps of the Elysee palace in Paris. "The plan ... is the only way to solve Greece's debt problem."

Japan's finance minister, Jun Azumi, echoed his comments, as the Nikkei share average fell as much as 2 percent Wednesday. "Everyone is bewildered," he said.

Timing, result unpredictable
Greek government spokesman Elias Mossialos said the referendum would take place "as soon as possible, right after the basics of the bailout deal are formulated," but would not be drawn on whether that meant before Christmas.

With so much of the detail of the deal to keep Greece afloat still to be nailed down, the vote seems unlikely to take place before the end of the year and Greek officials said on Monday it was likely in mid-January.

Opinion polls suggest most voters think it is a bad deal, but much will depend on how Papandreou frames the debate, either on the bailout -- and hence the cuts that will follow -- or membership of the euro, which remains popular.

German Finance Minister Wolfgang Schaeuble told Wednesday's Financial Times Deutschland newspaper he was confident the Greeks would support the government's reforms in the referendum.

"If Greece accepts the burden and efforts required by the aid programs, if it wants to stay within the euro zone, then we will support it," Schaeuble said.

Papandreou said Greece's partners would support its policies and urged the G20 meeting in Cannes to agree policies that "make sure democracy is above market appetites."

But his move is bound to embarrass G20 host Sarkozy as he tries to coax big emerging nations such as China into throwing the euro zone a financial lifeline by investing an expanding bailout fund.

It could also further undermine dwindling political support in northern Europe for aiding Greece.

The chairman of euro zone finance ministers, Jean-Claude Juncker, said Greece could go bankrupt if voters rejected the bailout package.

Confidence vote
Papandreou's most immediate hurdle is the parliamentary confidence vote Friday.

"We believe the government will once again win a vote of confidence in order to proceed with its plans," government spokesman Angelos Tolkas told reporters. "We will not back down on anything we have to do to save the country."

Six senior members of Greece's ruling PASOK socialists, angered by Papandreou's decision to call a plebiscite on the 130 billion euro rescue package, said he should make way for a "politically legitimate" administration.

During the cabinet meeting that wrapped up around 3 a.m. after seven hours, some ministers questioned the timing of the referendum and criticized the fact they had been kept in the dark -- even the finance minister had not been told -- and a handful were openly against it, government sources said.

"I think this was the wrong decision and we must take it back," one minister was quoted as saying. "We must not risk our position in the euro."

A leading PASOK lawmaker earlier quit the party, narrowing Papandreou's slim majority to 152 of 300 seats, and several others called for a government of national unity followed by a snap election, which the opposition also demanded.

Papandreou needs 151 votes to enact the referendum. If any of the dissenters votes against, it cannot be held, and there is still plenty of dissent.

"For the first time we are admitting publicly that our policy lacks legitimacy," one minister said he told the meeting, speaking to reporters on condition of anonymity.

Shares pounded
Doubt about Europe's ability to contain the debt crisis has once more sent investors fleeing from riskier assets across the world. Asian shares fell and the euro hovered near three-week lows against the dollar Wednesday.

U.S. stocks tumbled more than 2.5 percent and European shares posted their biggest one-day loss in more than a month Tuesday.

The risk premium on Italian bonds over safe-haven German Bunds hit a euro-lifetime high Tuesday, raising Rome's borrowing costs to levels above 6 percent that proved unsustainable for Ireland and Portugal.

European bank shares dived on fears of a disorderly Greek default and the Athens Stock Exchange suffered its biggest daily drop since October 2008, with the general index shedding 7.7 percent.

Greece is due to receive an 8 billion-euro IMF/EU aid tranche in mid-November, but that is likely to run out during January, around the time of the referendum, leaving the government with no funds if there is a "no" vote.

Dutch Finance Minister Jan Kees de Jager said the IMF might have difficulty paying out that tranche because of the looming referendum. "I can imagine it will be difficult for the IMF to decide about the tranche but there will be uncertainty ... it is problematic," he told the Dutch parliament.

Copyright 2011 Thomson Reuters.

Read More

Greek deputy defects, reduces Socialists majority

3:53 AM defects, deputy, Greek, majority, reduces, Socialists No Comments

ATHENS, Greece — A Greek governing party deputy has defected over the prime minister's surprise decision to hold a referendum on a European debt deal, leaving the Socialists with only a two-seat majority in Parliament.

Milena Apostolaki's office said Tuesday she had declared herself an independent deputy in a letter to Parliament speaker. The move leaves the governing Socialist party with 152 seats in the 300-member legislature.

Prime Minister George Papandreou's shock decision late Monday led to markets plunging on fears that Europe's plan to save the euro will unravel. Papandreou has not set a date for the referendum, expected to be held early next year. He has also called a confidence vote in his government on Friday.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Read More

'Huge relief': Banks agree to take loss on Greek debt

5:51 PM agree, Banks, Greek, relief No Comments

BRUSSELS — European leaders clinched a deal Thursday they hope will mark a turning point in their two-year debt crisis, agreeing after a night of tense negotiations to have banks take bigger losses on Greece's debts and to boost the region's weapons against the market turmoil.

After months of dawdling and half-baked solutions, the leaders had been under immense pressure to finalize their plan to prevent the crisis from pushing Europe and much of the developed world back into recession and to protect their currency union from unraveling.

World stock markets surged higher Thursday on the news. Oil prices rose above $92 per barrel while the euro gained strongly — a signal investors were relieved at the outcome of the contentious negotiations.

"We have reached an agreement, which I believe lets us give a credible and ambitious and overall response to the Greek crisis," French President Nicolas Sarkozy told reporters after the meeting ended early Thursday. "Because of the complexity of the issues at stake, it took us a full night. But the results will be a source of huge relief worldwide."

U.S. President Barack Obama also welcomed the deal, saying Europe's new debt plan lays a "critical foundation" for a comprehensive solution to the continent's financial crisis.

In a statement, Obama said the U.S. looks forward to the rapid implementation of the plan.

Europe's strategy unveiled after 10 hours of negotiations focused on three key points. These included a significant reduction in Greece's debts, a shoring up of the continent's banks, partially so they could sustain deeper losses on Greek bonds, and a reinforcement of a European bailout fund so it can serve as a €1 trillion ($1.39 trillion) firewall to prevent larger economies like Italy and Spain from being dragged into the crisis.

After several missed opportunities, hashing out a plan was a success for the 17-nation eurozone, but the strategy's effectiveness will depend on the details, which will have to be finalized in the coming days and weeks.

"These are exceptional measures for exceptional times. Europe must never find itself in this situation again," European Commission President Jose Manuel Barroso said after the meetings.

Japan and Canada welcomed the euro zone agreement. China's official Xinhua news agency said the outcome was "positive but filled with difficulties."

The most difficult piece of the puzzle proved to be Greece, whose debts the leaders vowed to bring down to 120 percent of its GDP by 2020. Under current conditions, they would have ballooned to 180 percent.

To achieve that massive reduction, private creditors like banks will be asked to accept 50 percent losses on the bonds they hold. The Institute of International Finance, which has been negotiating on behalf of the banks, said it was committed to working out an agreement based on that "haircut," but the challenge now will be to ensure that all private bondholders fall in line.

It said the 50 percent cut equals a contribution of €100 billion ($139 billion) to a second rescue for Greece, although the eurozone promised to spend some €30 billion ($42 billion) on guaranteeing the remaining value of the new bonds.

The full program is expected to be finalized by early December and investors are supposed to swap their bonds in January, at which point Greece is likely to become the first euro country ever to be rated at default on its debt.

"We can claim that a new day has come for Greece, and not only for Greece but also for Europe," said Greek Prime Minister George Papandreou, whose country's troubles touched off the crisis two years ago. "Let's hope the worst is over."

Since May 2010, Greece has been surviving on rescue loans worth €110 billion ($150 billion) from the 17 countries that use the euro and the International Monetary Fund since it can't afford to borrow money directly from markets.

In July, those creditors agreed to extend another €109 billion — but that plan was widely panned as insufficient.

Now, in addition to €30 billion in bond guarantees, the eurozone leaders and IMF said they will give Greece €100 billion ($139 billion) in new loans.

With the banks being asked to shoulder more of the burden, though, there were concerns they needed more money in their rainy-day funds to cushion their losses. So European leaders have asked them to raise €106 billion ($148 billion) by June.

"While the headlines look good, the devil is in the details," said Damien Boey, equity strategist at Credit Suisse in Sydney.

Protecting the weak
The last piece in the complicated plan was to increase the firepower of the continent's bailout fund to ensure that other countries with troubled economies — like Italy and Spain — don't get dragged into the crisis. The third- and fourth-largest economies of the eurozone are too large to be bailed out like the smaller euro nations Greece, Portugal and Ireland have already been.

To that end, the €440 billion ($610 billion) European Financial Stability Facility will be used to insure part of the potential losses on the debt of wobbly eurozone countries like Italy and Spain, rendering its firepower equivalent to around €1 trillion ($1.39 trillion).

With the banks being asked to shoulder more of the burden, though, there were concerns they needed more money in their rainy-day funds to cushion their losses. So European leaders have asked them to raise €106 billion ($148 billion) by June.

The last piece in the complicated plan was to increase the firepower of the continent's bailout fund to ensure that other countries with troubled economies — like Italy and Spain — don't get dragged into the crisis. The third- and fourth-largest economies of the eurozone are too large to be bailed out like the smaller euro nations Greece, Portugal and Ireland have already been.

To that end, the €440 billion ($610 billion) European Financial Stability Facility (EFSF) will be used to insure part of the potential losses on the debt of wobbly eurozone countries like Italy and Spain, rendering its firepower equivalent to around €1 trillion ($1.39 trillion).

That should make those countries' bonds more attractive investments and thus lower borrowing costs for their governments.

In addition to acting as a direct insurer of bond issues, the EFSF insurance scheme is also supposed to entice big institutional investors to contribute to a special fund that could be used to buy government bonds but also to help states recapitalize weak banks.

Such outside help may be necessary for Italy and Spain, whose banks were facing some of the biggest capital shortfalls.

Using the insurance promise, the eurozone also hopes to attract big institutional investors from outside the eurozone, such as sovereign wealth funds, to contribute to a separate fund that would back up the EFSF.

Reuters and The Associated Press contributed to this report.

Read More

Sarkozy: Greek debt crisis like Lehman Brothers'

7:43 PM Brothers, crisis, Greek, Lehman, Sarkozy No Comments

PARIS — It was a mistake to let Greece join the euro single currency when it did because its economy was not ready to form a monetary union with others in the club, French President Nicolas Sarkozy said Thursday.

How your car could testify against you Goodbye 'bunga bunga', hello prison for Berlusconi? NBC News: Paterno contacts criminal defense lawyer Updated 105 minutes ago 11/11/2011 2:31:37 PM +00:00 Ai Weiwei tackles tax bill, with Chinese help Helping women soar in tough economy Are there bogus charges on your phone bill? Good buddies: Truckers transport rescued animals

"It was a mistake," Sarkozy said, when asked during a TV interview about having Greece adopt the euro two years after the single currency was created.

"Its economy was not ready," Sarkozy said.

Sarkozy gave a rare televised interview to explain the euro zone crisis plan agreed in Brussels the previous evening to the French electorate, six months before a presidential election.

He likened Greece's sovereign debt crisis to the crisis at Lehman Brothers, and said that a failure to come up with a way to help Greece would have thrown the euro zone and world economy into disorder.

"If Greece had gone bankrupt, there would have been a domino effect that would have affected everybody. The entire euro zone risked being taken down," Sarkozy said.

The deal, thrashed out after days of tense talks between Sarkozy, German Chancellor Angela Merkel, other euro zone leaders and private financial institutions, halved Greece's private-sector debt to 100 billion euros after bondholders agreed a 50 percent haircut.

Copyright 2011 Thomson Reuters.

Read More

'Huge relief': Banks agree to take loss on Greek debt

9:55 AM agree, Banks, Greek, relief No Comments

BRUSSELS — European leaders clinched a deal Thursday they hope will mark a turning point in their two-year debt crisis, agreeing after a night of tense negotiations to have banks take bigger losses on Greece's debts and to boost the region's weapons against the market turmoil.

After months of dawdling and half-baked solutions, the leaders had been under immense pressure to finalize their plan to prevent the crisis from pushing Europe and much of the developed world back into recession and to protect their currency union from unraveling.

World stock markets surged higher Thursday on the news. Oil prices rose above $92 per barrel while the euro gained strongly — a signal investors were relieved at the outcome of the contentious negotiations.

"We have reached an agreement, which I believe lets us give a credible and ambitious and overall response to the Greek crisis," French President Nicolas Sarkozy told reporters after the meeting ended early Thursday. "Because of the complexity of the issues at stake, it took us a full night. But the results will be a source of huge relief worldwide."

U.S. President Barack Obama also welcomed the deal, saying Europe's new debt plan lays a "critical foundation" for a comprehensive solution to the continent's financial crisis.

In a statement, Obama said the U.S. looks forward to the rapid implementation of the plan.

Europe's strategy unveiled after 10 hours of negotiations focused on three key points. These included a significant reduction in Greece's debts, a shoring up of the continent's banks, partially so they could sustain deeper losses on Greek bonds, and a reinforcement of a European bailout fund so it can serve as a €1 trillion ($1.39 trillion) firewall to prevent larger economies like Italy and Spain from being dragged into the crisis.

After several missed opportunities, hashing out a plan was a success for the 17-nation eurozone, but the strategy's effectiveness will depend on the details, which will have to be finalized in the coming days and weeks.

"These are exceptional measures for exceptional times. Europe must never find itself in this situation again," European Commission President Jose Manuel Barroso said after the meetings.

Japan and Canada welcomed the euro zone agreement. China's official Xinhua news agency said the outcome was "positive but filled with difficulties."

The most difficult piece of the puzzle proved to be Greece, whose debts the leaders vowed to bring down to 120 percent of its GDP by 2020. Under current conditions, they would have ballooned to 180 percent.

To achieve that massive reduction, private creditors like banks will be asked to accept 50 percent losses on the bonds they hold. The Institute of International Finance, which has been negotiating on behalf of the banks, said it was committed to working out an agreement based on that "haircut," but the challenge now will be to ensure that all private bondholders fall in line.

It said the 50 percent cut equals a contribution of €100 billion ($139 billion) to a second rescue for Greece, although the eurozone promised to spend some €30 billion ($42 billion) on guaranteeing the remaining value of the new bonds.

The full program is expected to be finalized by early December and investors are supposed to swap their bonds in January, at which point Greece is likely to become the first euro country ever to be rated at default on its debt.

"We can claim that a new day has come for Greece, and not only for Greece but also for Europe," said Greek Prime Minister George Papandreou, whose country's troubles touched off the crisis two years ago. "Let's hope the worst is over."

Since May 2010, Greece has been surviving on rescue loans worth €110 billion ($150 billion) from the 17 countries that use the euro and the International Monetary Fund since it can't afford to borrow money directly from markets.

In July, those creditors agreed to extend another €109 billion — but that plan was widely panned as insufficient.

Now, in addition to €30 billion in bond guarantees, the eurozone leaders and IMF said they will give Greece €100 billion ($139 billion) in new loans.

With the banks being asked to shoulder more of the burden, though, there were concerns they needed more money in their rainy-day funds to cushion their losses. So European leaders have asked them to raise €106 billion ($148 billion) by June.

"While the headlines look good, the devil is in the details," said Damien Boey, equity strategist at Credit Suisse in Sydney.

Protecting the weak
The last piece in the complicated plan was to increase the firepower of the continent's bailout fund to ensure that other countries with troubled economies — like Italy and Spain — don't get dragged into the crisis. The third- and fourth-largest economies of the eurozone are too large to be bailed out like the smaller euro nations Greece, Portugal and Ireland have already been.

To that end, the €440 billion ($610 billion) European Financial Stability Facility will be used to insure part of the potential losses on the debt of wobbly eurozone countries like Italy and Spain, rendering its firepower equivalent to around €1 trillion ($1.39 trillion).

With the banks being asked to shoulder more of the burden, though, there were concerns they needed more money in their rainy-day funds to cushion their losses. So European leaders have asked them to raise €106 billion ($148 billion) by June.

The last piece in the complicated plan was to increase the firepower of the continent's bailout fund to ensure that other countries with troubled economies — like Italy and Spain — don't get dragged into the crisis. The third- and fourth-largest economies of the eurozone are too large to be bailed out like the smaller euro nations Greece, Portugal and Ireland have already been.

To that end, the €440 billion ($610 billion) European Financial Stability Facility (EFSF) will be used to insure part of the potential losses on the debt of wobbly eurozone countries like Italy and Spain, rendering its firepower equivalent to around €1 trillion ($1.39 trillion).

That should make those countries' bonds more attractive investments and thus lower borrowing costs for their governments.

In addition to acting as a direct insurer of bond issues, the EFSF insurance scheme is also supposed to entice big institutional investors to contribute to a special fund that could be used to buy government bonds but also to help states recapitalize weak banks.

Such outside help may be necessary for Italy and Spain, whose banks were facing some of the biggest capital shortfalls.

Using the insurance promise, the eurozone also hopes to attract big institutional investors from outside the eurozone, such as sovereign wealth funds, to contribute to a separate fund that would back up the EFSF.

Reuters and The Associated Press contributed to this report.

Read More

Sarkozy: Greek debt crisis like Lehman Brothers'

11:54 AM Brothers, crisis, Greek, Lehman, Sarkozy No Comments

PARIS — It was a mistake to let Greece join the euro single currency when it did because its economy was not ready to form a monetary union with others in the club, French President Nicolas Sarkozy said Thursday.

Is the tide turning in Thailand's floods? NBC News 'Rock Center': Sneaking into Syria Want to live longer? Get happy, study says Iran demands US apology, cash over alleged assassination plot Binge eating a hidden problem among men Halloween hazard: Xylitol-laced treats could kill your dog Born in the U.S.A.: Websites target birth tourists

"It was a mistake," Sarkozy said, when asked during a TV interview about having Greece adopt the euro two years after the single currency was created.

"Its economy was not ready," Sarkozy said.

Sarkozy gave a rare televised interview to explain the euro zone crisis plan agreed in Brussels the previous evening to the French electorate, six months before a presidential election.

He likened Greece's sovereign debt crisis to the crisis at Lehman Brothers, and said that a failure to come up with a way to help Greece would have thrown the euro zone and world economy into disorder.

"If Greece had gone bankrupt, there would have been a domino effect that would have affected everybody. The entire euro zone risked being taken down," Sarkozy said.

The deal, thrashed out after days of tense talks between Sarkozy, German Chancellor Angela Merkel, other euro zone leaders and private financial institutions, halved Greece's private-sector debt to 100 billion euros after bondholders agreed a 50 percent haircut.

Copyright 2011 Thomson Reuters.

Read More

Greek PM reportedly ready to step down

6:02 AM Greek, ready, reportedly No Comments

ATHENS, Greece — Greek Prime Minister George Papandreou faces a knife-edge confidence vote on Friday after his plan for a referendum on a bailout -- supposed to save both Greece and the euro zone from disaster -- backfired disastrously.

But even if his socialist government survives the parliamentary vote, Papandreou's days as Greek leader looked numbered after a deal with his cabinet under which, government sources said, he agreed to stand down after negotiating a coalition with the conservative opposition.

Much of Greece and many European leaders reacted with horror after Papandreou abruptly announced on Monday that he would put the 130-billion-euro ($180-billion) rescue plan, agreed at a euro zone summit only last week, to the Greek people.

Papandreou came out fighting, rejecting opposition demands, in public at least, that he make way for a caretaker administration with just two tasks: forcing the bailout through parliament without a referendum and calling of snap elections.

However, analysts said Papandreou may not be around much longer to fight such battles.

"The prime minister's position is very difficult, since he chose not to respond to the opposition's proposal for a transitional coalition government. Therefore I believe that it is unlikely that he will win the vote," said head of ALCO pollsters, Costas Panagopoulos.

Through waves of austerity policies demanded by the nation's international lenders, Papandreou has carried the parliamentary group of his PASOK party with him, despite much grumbling within the ranks.

But a steady trickle of defections has reduced his majority to the point that one or two waverers could inflict a defeat in the confidence vote, expected as late as midnight (6 p.m. EST)

PASOK has 152 deputies in the 300-member parliament. But lawmaker Eva Kaili said that while she would stay in the party, she would refuse to support the government in the confidence vote, meaning Papandreou could count at most on the support of 151 deputies.

Only one more defection would strip the government of its majority and probably trigger early elections.

Meanwhile, Greece's cost of borrowing ballooned, with the interest demanded by markets to buy Greek 10-year bonds exceeding 31 percent — compared to 2 percent for European powerhouse Germany.

How your car could testify against you Goodbye 'bunga bunga', hello prison for Berlusconi? NBC News: Paterno contacts criminal defense lawyer Updated 104 minutes ago 11/11/2011 2:31:37 PM +00:00 Ai Weiwei tackles tax bill, with Chinese help Helping women soar in tough economy Are there bogus charges on your phone bill? Good buddies: Truckers transport rescued animals

Greeks have fought tooth and nail against policies which have brought spending cuts, tax rises and job losses, pushing the nation into three years of recession, and they have staged a series of strikes and protests, some of which turned violent.

This made a "no" vote in any referendum highly likely, even though this would cut off Greece's last international financial lifeline and risked spreading its debt crisis to much bigger euro zone economies, such as Italy and Spain.

But after a tumultuous day in Greek politics, the chances of the referendum being held dwindled to almost nothing on Thursday. Papandreou offered to drop the idea anyway if the conservative opposition backed the bailout in parliament.

Over the day, he talked about negotiating with the conservative New Democracy party, saying the national interest ranked well above his personal ambitions. "I'm not tied to my post. I'm not interested either in being re-elected, I'm only interested in saving the country," he told parliament.

Papandreou also called on his PASOK party to rally behind him in the confidence vote. But his public bravado appeared to mask an acceptance that his term may come to an end soon.

Government sources said Papandreou had struck a deal at a cabinet meeting on Thursday under which he would stand down after he had negotiated a coalition agreement with the conservative opposition -- provided he survives Friday's vote.

Ministers involved in striking the deal with Papandreou, led by Finance Minister Evangelos Venizelos, said he should go for the sake of their PASOK party, said the sources, who had knowledge of Thursday's meeting of the cabinet.

Papandreou was summoned to an emergency European meeting in Cannes, France, on Wednesday night, where the visibly irate French and German leaders said any referendum would in fact be a question of whether Greece retains its cherished membership of the 17-nation euro common currency. They also put on hold the next, vital payout of Greece's existing bailout until after a vote was held.

A Greek Finance Ministry official told the AP that Greece has cash until mid-December. After that, without the €8 billion ($11 billion) disbursement, Greece would most likely be unable to service its debt or pay pensions and salaries.

Venizelos accompanied Papandreou to the Riviera but led a revolt against the referendum idea on his return to Athens before dawn Thursday.

With Greece's euro membership and bailout loan lifeline suddenly in danger, pressure mounted for Papandreou to resign. The conservative opposition and even his own deputies called for the creation of a transition government to pass the new European debt deal.

Venizelos said, as the opposition now indicated it would support the European debt deal, a referendum was no longer necessary.

"The government went to Cannes with the position that if the necessary consensus is formed there will be no need to hold a referendum," he said. "We must highlight the fact that there is a window of a consensus."

He said the new debt deal would be brought to parliament under a procedure that would require a reinforced majority of 180 out of the 300 lawmakers to vote in favor. With the governing Socialists holding 152 seats, that means the debt deal will only pass if the opposition also votes in favor.

But conservative opposition leader Antonis Samaras quickly dispelled any impression of unity, arguing that he had already agreed to back the vital deal, and demanded elections — within the next six weeks if possible.

Europe's deepening crisis threatens US economy

Papandreou "nearly pulled the universe apart to supposedly persuade me to agree to something that I had already said was unavoidable," he told parliament later Thursday, during a debate on the upcoming confidence vote.

"Mr. Papandreou pretends that he didn't understand what I told him," he said. "I called on him to resign."

Samaras then led his lawmakers in a dramatic walkout of the debate, without indicating whether he would vote in favor of the deal.

The drama in Greece sent immediate ripples throughout Europe. Premier Silvio Berlusconi's government in Italy was teetering as well Thursday after it failed to come up with a credible plan to deal with its dangerously high debts, and Portugal demanded more flexible terms for its own bailout. The European Central Bank made a surprise decision to cut interest rates by a quarter of a percentage point, to 1.25 percent, in an acknowledgment of the fragility of the continent's finances.

Talk of Greece also dominated the G-20 summit in the French resort of Cannes, where the leaders of the world's economic powerhouses gathered to solve Europe's debt crisis, which threatens to push the world back into recession.

During a summit break, French President Nicolas Sarkozy praised the Greek opposition's backing for the debt-crippled country's new bailout as "courageous and responsible."

Greece's new debt deal would give the country an extra €130 billion ($179 billion) in rescue loans from the rest of the eurozone and the International Monetary Fund — on top of the €110 billion ($152 billion) it was granted a year ago. It would also see banks forgive Athens 50 percent of the money it still owes them. The goal is to reduce Greece's massive debts to the point where the country is able to handle its finances without constant bailouts.

Polls indicate the Greek public is close to the breaking point after more than 20 months of harsh austerity cuts and tax hikes. Recent opinion surveys show 90 percent opposing Papandreou's policies and his party polling just 20 percent public support.

Underlining that point, 300 people held a peaceful anti-austerity protest in central Athens late Thursday

The political drama continues Friday, when parliament will hold a confidence vote on the government. Papandreou's majority has been reduced to the bare minimum 151 after Socialist lawmaker Eva Kaili said she would not vote in favor.

"Tomorrow's vote is of particular significance, for the confidence vote provides a guarantee of how we will make our new steps ... and how we will talk with the opposition parties," Papandreou said.

The omens are poor: The two other European governments besides Greece that have received bailouts — Portugal and Ireland — have seen their governments fall during the economic turmoil.

Reuters and The Associated Press contributed to this report

Read More

Europe braces for impact of Greek default

10:15 PM braces, default, Europe, Greek, impact No Comments

By John W. Schoen, Senior Producer

With Greece just weeks away from running out of cash, the European Union is fast running out of options to save the currency union and head off another global recession.

The focus is now shifting to once-unthinkable scenarios that await Europe if the Greek government defaults on its debt.

Petros Giannakouris / AP

International Monetary Fund representative Bob Traa speaks at a conference in Athens Monday. The IMF, European Central Bank and European Union are trying to work out a plan to avoid a Greek debt default.

Hopes were raised that a weekend meeting of European Union leaders – aided by an unprecedented visit from U.S. Treasury Secretary Timothy Geithner – could break a downward spiral of confidence that has engulfed the European banking system.

But on Monday, after giving Geithner a chilly reception, European officials remained deadlock after nearly two years of failed efforts to head off a Greek default.

"A Greek default looks to be imminent,” Gluskin Sheff chief economist David Rosenberg write in a note to clients Monday. “The EU finance meeting was a colossal waste of time. Nothing concrete came out of it.”

There were fresh signs Monday that Greece has run out of time. Greece's prime minister abruptly canceled a trip to the U.S. to remain in Athens to deal with the crisis. European officials have delayed payment of the next $8 billion of financial assistance until Greece meets budget-balancing targets imposed as a condition for help. Without the money, Greece will be unable to pay government worker salaries and pensions by the middle of next month.

In a last-ditch effort to balance its budget, Greek officials last week announced a new $2 billion property tax – to be collected by the state electricity company. Workers there have threatened to refuse to collect the tax, and European officials Monday said the new tax would raise only half as much as Greek officials are projecting.

The revolt in Greece is echoing throughout Europe, as voters in wealthier “core” countries like Germany and France harden their opposition to bailing out weaker southern economies including Greece, Portugal, Spain and Italy. It’s part of a growing “revolt against Brussels,” according to Nicolas Burns, a former U.S. ambassador and now professor at Harvard's Kennedy School of Government.

“It’s reminiscent of the revolt by Americans against their own government in Washington, but it’s much more serious and deeply rooted in Europe,” he told CNBC. “People want to reclaim some control and ownership that used to reside in nation-states that now reside in this huge bureaucracy. It's difficult for politicians to overcome that depth of public sentiment."

The rising prospect of Greek default leaves European leaders with several unappealing scenarios.

Even if German officials relent and ease their insistence that Greece meet strict budget targets, the country faces a grim future. Spending cuts and higher taxes have sent the Greek economy in reverse, forcing bigger cuts, which only deepens the recession. That’s prompted some observers to call for an “orderly default.”

Such a default would wipe billions of dollars of capital from the books of Europe’s banks, which is making it harder for the banks to borrow.

Banks holding large chunks of Greek debt face the biggest losses, but it’s not clear which banks would be hit hardest. That’s sparked fears of another Lehman-like financial panic, when bankers grew increasingly skittish about lending to anyone holding shaky mortgage bonds. Only this time the “toxic” bonds are debt issued by Greece and Italy.

“What bank would want to lend to another if it felt that other bank’s solvency was threatened by exposure to defaulted government debt?” said John Higgins, a market economist at Capitol Economics.

In the Panic of 2008, U.S. bankers could turn to a single central bank and the U.S. Treasury for help. But Europe’s central bank is deeply divided over how aggressively to respond to the crisis. A senior German ECB official resigned last week over a proposal to have the central bank buy up more Greek and Italian debt. Europe has no national Treasury, which could force individual countries to bail out their own banks.

“(If Greece defaults), it's unknown which of these national governments can underwrite their banking sectors and which ones can't,” said Philippa Malmgren, an investment consultant and former economic adviser to President George W. Bush. "But you will have bank failures.”

A default by Greece also would raise the prospect of Athens leaving the euro zone and returning to its former currency, the drachma. German officials have already reportedly begun preparing for such an outcome.

Doing so would avoid a “vicious cycle of insolvency, low competitiveness and ever-deepening depression,” economist Nouriel Roubini said in a column published in the Financial Times Monday.

In the short term, reviving the drachma would inflict even more hardship on Greece: Its banking system would still need to raise fresh capital, while the cost of imports from Europe would soar. The hope is that over the long term it could repair the financial damage and restore economic growth.

A Greek default also would add to pressure on Italy, Portugal, Ireland and Spain. The risk is that these countries would be forced deeper into the same downward spiral. As nervous investors and creditors demand higher interest rates to offset the risk of a default, they would be forced to cut spending and raise taxes to pay the higher cost of borrowing. That would further reduce growth, making bond buyers even more nervous, raising borrowing costs higher – the same vicious circle that has engulfed Greece.

If additional countries were forced to follow Greece’s footsteps, Europe could be reduced to its “core” economies, led by Germany and France. It remains to be seen whether those countries could weather such a sharp contraction of the eurozone – even if it were engineered in an orderly fashion.

With time running out, and European leaders facing increasing voter resistance to forging a consensus, some have begun contemplating the prospect of a breakup of European Union. Such an outcome could have dire long-term consequences, according to Poland’s Financial Minister, Jacek Rostowski.

“In the absence of the key elements of our security system on the key elements of our political system that insures that we deal with problem in this peaceful democratic way that we’ve developed - if that were not there then the risk of all sorts of authoritarian political movements, and therefore the risk of even war, in the long horizon, rises,” he told CNBC.

CNBC's Michelle Caruseo-Cabrera has the latest from Athens:

CNBC's Michelle Caruso-Cabrera has the details on the finance minister to conference with Euro Zone and IMF officials.

Read More

Greek PM cancels U.S. trip as debt crisis deepens

4:15 AM cancels, crisis, deepens, Greek No Comments

ATHENS — Greek Prime Minister George Papandreou canceled a planned visit to the United States on Saturday to deal with a deepening crisis at home, days before European Union and IMF inspectors decide on further funding for the debt-ridden country.

Finance Minister Evangelos Venizelos rushed to allay fears the canceled trip signaled imminent default, saying such talk was "ridiculous," but the conservative opposition seized the opportunity to demand snap elections, fanning fears Greece lacks the will needed for tough measures ahead.

"The comments and analyses about an imminent default or bankruptcy are not only irresponsible but also ridiculous," Venizelos said in a statement.

"Every weekend Greece ... is subject to this organised attack by speculators in international markets."

Papandreou was in London, en-route to United Nations and International Monetary Fund (IMF) meetings, when he decided to turn back after discussing developments with Venizelos, government officials said.

"The prime minister judged that he should not be away. He wants to ensure that all of Greece's commitments (to its EU partners) are fulfilled," government spokesman Ilias Mossialos told Reuters.

A government official speaking on condition of anonymity told Reuters pressure was high on Athens from euro zone partners to take additional measures to merit continued funding from a 110 billion euro ($150 billion) bailout to avert default.

"There is an issue of trust. Our partners want very specific steps and commitments and our record so far unfortunately does not inspire confidence," said the official.

Next week, Greece is due to resume talks with EU and IMF inspectors who will judge fiscal progress before releasing the next 8 billion euro loan tranche in October.

Greece has said it has cash until next month.

"It's a sign that things are very tight. Papandreou's presence is crucial to make sure there are no setbacks with issues that need to be resolved," said Theodore Krintas, head of wealth management at Attica Bank.

ELECTION CALL

The conservative opposition New Democracy party, which voted against the bailout that saved Greece from bankruptcy last year, seized the opportunity to make a fresh call for snap elections.

"The only solution is elections, so that the people's will is expressed," New Democracy leader Antonis Samaras said in a speech in the northern city of Thessaloniki.

New Democracy, which is leading the ruling socialists in opinion polls, says the policy mix used cannot bring Greece out of the crisis and austerity measures were stifling the economy.

The conservatives are riding a wave of public discontent after two years of austerity measures and are proposing tax cuts and growth boosting measures instead.

"When a policy hurts my country, I will surely say no. Why should I co-sign a mistake?" Samaras said. "We want this destructive policy toppled."

Apart from the slow pace of reforms and fiscal slippages, international lenders are most concerned with the lack of political consensus in Greece. Even if elections are held in 2013 as planned, the next government must apply agreed policies for the country to recover.

The ruling socialists have a majority in parliament but political analysts say internal dissent and public unrest, such as strikes and violent protests, may prompt snap elections.

Fiscal slippage this year, which the government blamed on a deeper-than-projected recession, forced Athens to slap a levy on property to make up for the shortfall as a target of capping its budget deficit at 7.6 percent of gross domestic product looked out of reach.

Lenders have long warned against one-off measures and more taxes as a way out of the crisis shaking the euro. They have asked for urgent reforms and privatisations and a drastic shrinking of the bloated public sector.

EU economic and monetary affairs commissioner Olli Rehn has said inspectors from the European Central Bank, EU and IMF would report back on progress in early October, meaning the next disbursement of aid to Greece could be paid by mid-October.

A second 109 billion euro bailout agreed in July, after it became clear Greece would not be able to return to bond markets, has also hit snags.

Euro zone partners are asking for collateral before giving Athens more cash and banks are slow to participate in a bond swap scheme key to the deal.

Papandreou was to meet United Nations Secretary-General Ban Ki-Moon in New York on Sunday and IMF head Christine Lagarde on Tuesday. Venizelos is still due to attend an IMF meeting in Washington later in the week.

Copyright 2011 Thomson Reuters.

Read More

Greek police fire tear gas at protesting cabbies

8:07 AM cabbies, Greek, police, protesting No Comments

AppId is over the quota
AppId is over the quota
THESSALONIKI, Greece — Greece will meet ambitious savings targets despite a deepening recession this year, the prime minister said Saturday, to secure the continued flow of international rescue loans that are protecting the debt-crippled country from a catastrophic bankruptcy.

As George Papandreou delivered his annual, keynote speech on the economy in Greece's second-largest city of Thessaloniki, police on the streets outside clashed with violent demonstrators as more than 25,000 people — from taxi-drivers to sports fans — joined a wave of anti-austerity protests.

Two people were arrested and nearly 100 people detained, police said, while at least two demonstrators were injured during the clashes in the northern port city.

"We will push through all the major changes our country has needed for years," Papandreou said in a nationally televised address. "And we will take whatever other decisions are needed, we will do whatever is necessary to keep the country on its feet."

The government has promised to make up for weeks of inactivity by accelerating overdue reforms meant to cut excess from the bloated public sector. It even broke a major taboo by warning that thousands of civil servants — hired with guarantees of lifetime jobs — could be fired.

Papandreou said his main concern was to keep the country solvent.

"We don't have the right to abandon this effort halfway through," he said. "Because if it remains half-done, (our) sacrifices will have been in vain."

Papandreou's Socialist government has imposed painful austerity measures over the past 20 months — cutting pensions and salaries while raising taxes and retirement ages — to secure vital international rescue loans worth €219 billion ($302.6 billion). But its efforts to economize while reviving a fast-contracting economy amid record unemployment have faltered, sparking new market distress.

Finance Minister Evangelos Venizelos, who was forced to deny rumors of impending bankruptcy over the weekend, said earlier that the economy is expected to contract more than 5 percent this year, considerably exceeding forecasts. But Papandreou insisted that this would not derail the savings drive, which is meant to cut budget overspending from 10.5 to 7.6 percent of gross domestic product this year.

"Even if the recession is significantly deeper than forecast ... Greece will achieve its fiscal targets, doing everything it must to that purpose," he said. "At the point the eurozone and the international financial system have reached right now, any delay, any ambiguity, any option other than to faithfully honor our commitments is dangerous for our country and its citizens."

Roiling over licensing reform
Several thousand taxi drivers protesting new licensing reforms launched a chain of separate marches, chanting anti-government slogans. Members of the country's two biggest labor unions, university students, anarchists — and even fans of a soccer club — joined in.

In Athens, police fired stun grenades to disperse around 400 protesters who tried to block a main road outside Parliament. The protesters retaliated with firebombs that they lobbed at officers over passing traffic.

The default rumors, combined with the sudden resignation of senior European Central Bank official Juergen Stark, created new market fears that sent yields on Greek 10-year bonds surging to 21 percent. Greece has the worst credit rating in the world, just shy of default.

But Venizelos insisted Saturday the country could still pull through.

"Whoever believes that Greece has been broken or has no hope is clearly out of touch with reality," he said. "The two coming months are crucial for the very existence of our country. These are two months whose every day counts as a year in terms of effort."

By the end of October, Greece has to conclude talks on a complex bond swap deal under which private holders of its debt — mostly banks and pension funds — will take a loss on their holdings in return for new, more secure bonds.

Europe braces for impact of Greek default China's soaring costs could help American jobs Flying monsters resurrected in 3-D Who has what it takes to win 'Dancing'? Your Career: Whistleblower cases on rise World Blog: DSK expresses regret on French TV Jobless man follows in steps of Dust Bowl migrants

It must also persuade the European Union and the International Monetary Fund, which are providing the bailout loans, that it is making sufficient progress with fiscal discipline, reforms and privatizations. If Athens fails in that, the country will not receive the next €8 billion ($11 billion) batch of its loans, and will go bankrupt within weeks.

"The clearest message Greece is sending at this point ... is that we are absolutely determined, without taking any momentary political cost into account, to fully meet our obligations to our partners," Venizelos insisted.

Elected two years ago with a 10 percent margin, Papandreou's Socialists have seen their ratings fade as the cutbacks soared. A poll in the Sunday edition of Kathimerini newspaper shows the opposition conservatives 4 percentage points ahead, 32 percent to 28 percent, but also forecast a hung Parliament if elections were held now. The Public Issue poll had a margin of error of plus or minus 2.9 percent.

Under the previous conservative government, Greece falsified some of its financial data to hide the true extent of the country's debt problems.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Read More

Moody's warns almost certainly Greek standard

11:11 PM almost, certainly, Greek, Moodys, standard, warns No Comments

Athens - Moody cut Greece's credit rating more in junk-e-region on Monday and said that it was almost certain to beat a standard tag on its debts because of a new EU bailout.

It was the second rating agency to a default after euro zone leaders warn banks agreed last week that the private sector share of the burden of rescue business shoulder would, the Greece it provides more cash and easier credit conditions of water to keep and avoid further infection.

"The announced EU programme with the Institute of international finance statement implies that the probability of one tormented Exchange and thus by default on Greek Government bonds is virtually 100 percent," Moody's said in a statement.

Bank lobby IIF, the private sector negotiations, 90 percent investor participation in the bond Exchange will attract plan new 109 billion euro bailout coming across the EU.

Moody's cut is Greece of three notches, CA, just a notch above implies review according to the expected loss of proposed debt exchanges by default.

Greece now has the lowest rating of each country in the world covered by Moody's, Fitch said last week that it would reconsider Greece review after the debt swap is completed.

"Once the distressed Exchange is complete, Moody's will consider Greece rating to ensure that they risk of the country's new credit profile, including the potential for further debt restructuring, is equivalent to", it was said.

However pledged during Fitch, a higher, fast "low speculative grade" Greece be after its bonds had been exchanged, said Moody's it could predict if the assessment would change or like.

"There is, how fast the debt Exchange, takes place", says Alastair Wilson Moody's Managing Director for EMEA, credit policy. "Once we and transparency about, who we will quickly review the credit profile." Whether that will change review, which is another question, "he told Reuters."

A senior EU official said on Saturday, the goal was to start to close a voluntary private of Greek bond swap end of August and early September.

Greek bank stocks and the broader stock market was unimpressed by Moody's action. Analysts said that the downgrade and the default warning and less disturbing following assurances on the part of the EU deal would be listed.

"The Council last week effectively Greek banks continue to access to ECB liquidity, even in the event that PSI (participation of the private sector) solves a selective standard secured", said Plato of Monokroussos, an economist at EFG Eurobank.

The Government has criticized repeatedly reviews companies for their downgrades and their spokesman threatened on Monday to end his subscriptions to these agencies, as the new rescue package for years issuing new bonds means Greece.

"All Governments figures a subscription for such agencies." I think we need no longer not the reviews. "No practical value have, said Elias Mosialos radio-9.""Perhaps the Ministry of finance should terminate its subscription."

CONTAGION CONTAINED... FOR NOW

Moody's said that there is the possibility of a second standard account would during check of social Greek rating.

"Our experience is that relatively small restructuring were often followed by lower standards", said Wilson, adding that he could not say if this would be the case for Greece.

The rescue package for Greece from other countries in the euro zone risks with short-term infection, but it was not necessarily positive in the longer term as it is a for the participation of the private sector offers, rescue precedent, said Moody's.

"The support package sets a precedent for future restructuring the finances of an other sovereign of the euro area as the Greece should be a problem." Therefore likely credit-neutral is the impact at the Thursday announcement for creditors of Ireland and Portugal, "it said.

The cost for the insurance the peripheral euro zone debt against default rose on Monday on the market doubts that the fresh aid package for Greece agreed that last week major economies protect from infection.

Standard & poor's and Fitch rate Greece CCC, largely in line with Moody's rating. S & P has not yet said how the impact of EU Summit deal Greece rating.

Copyright 2011 Thomson Reuters.

Read More

Euro-zone are important Greek aid rate

9:15 AM Eurozone, Greek, important No Comments

BRUSSLES - euro-zone Finance Ministers say that Greece achieve a vital loan rate from July 15, will continue work on a second rescue mission for the struggling country.

The Ministers signed off their portion of the euro12 of billions (17.39 billion$) loan tranche in a conference call Saturday night. The International Monetary Fund to approve its share of the loan next week.

The Ministers also reaffirmed that she would continue to assist Greece of the euro110 billion loan package granted last year, but a final decision on the new aid plan left, found out the involvement of banks and other private creditors.

She said "the exact modalities and extent of participation of the private sector, and additional funding from official sources be fixed in the coming weeks."

Copyright 2011 associated press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Read More

Sarkozy: Banks accept Greek debt rollover

1:06 PM accept, Banks, Greek, rollover, Sarkozy No Comments

Athens/FRANKFURT - French banks have agreed to roles using stocks of Greek debt for 30 years, President Nicolas Sarkozy said on Monday, as the Greek Government to fought backbencher convince rebels to secure a crucial austerity plan to stave off the bankruptcy.

With the financial markets, the Greek crisis watch scary Sarkozy told a press conference in Paris that an agreement with the banks on one had reached the French authorities voluntary rollover sosrewanija bonds.

Those of us who cover put the loan over 30 years of closed (interest) at the level of European loans, plus a premium indexed to future Greek growth that would be a system, each country could find attractive, he said.

Scenes from the 2011 Paris air show the show has 140 aircraft and host more than 300,000 people during the June 20-26. Play with new interest in aerodynamics, automakers angle life Inc.: I'll marry you... If you get a job captured cities in the NFL Union Kampf life Inc.: daily deals not always a good deal for business

Banking sources confirmed that under which 70 per cent of the proceeds for the Greek bonds would due reinvest banks was part of an outline deal. This amount of 50 per cent in the new 30-year bonds go would, and 20 percent would be reinvested in a zero-coupon of guaranteed funds high-quality securities.

European Union officials discussed with international bankers and the Institute of international finance (IIF) in Rome said French idea on Monday, the euro-zone sources and German banks voiced interest in the "French model".

Each new financial rescue for Athens, including the official credit and involvement of the private sector, the Greek Parliament approval this week depends on a strict five year plan and legislation to implement structural reforms and privatisation.

Greek Finance Minister Evangelos Venizelos met ruling Socialist Party (PASOK) rebels in Athens, on foot, press the line in the parliamentary vote on Wednesday and Thursday, where a defeat of the country in default could plunge.

Greece has the conservative opposition calls for national unity, refused, forcing Prime Minister George Papandreou on his slim parliamentary majority a painful mix of spending cuts, tax increases and Government sales prevail to leave.

However with Greece plug into deep recession, has at least three PASOK deputies expressed serious reservations or outright opposition to a plan which they say crushed any hope of growth in the coming years and it is unclear how the numbers out will play.

Without Parliament's approval for the measures, which have caused a wave of strikes and demonstrations, Union and the International Monetary Fund say the they not the fifth tranche of EUR 110 billion bailout of agreed last year are free.

If the 12 billion euro tranche is not forthcoming, the Greek Government, which was ended by the financial markets due to the ruined State of public finances, money weeks, probably a Europe-wide crisis will trigger executed.

Preparations
Venizelos was due to meet members vary in the entire Monday in a last-ditch effort, vote to ensure:, after German Minister warned that Europe had to make plans for the event, a defeat that would block the next tranche of the aid.

"(Refusal) is not preparing to meet to plan A, or the most likely result, but the euro zone and the financial sectors", a Conference said Deputy Finance Minister Jorg Asmussen on Monday.

In the sign of the growing nervousness in financial markets to keep the premium investors demand Greek debt rather than benchmark German bonds extended by 20 basis points on Monday to 1,432 basis points.

The debate in the Parliament is to vote on Monday night with an initial vote on the framework of strict package due on Wednesday, and lawmakers then begins on Thursday on a separate bill containing specific steps to implement.

Defector in the last 13 months have to cut Papandreou support in the 300 member 155 seats, i.e. a handful of votes could decide the issue complicated may be the more, if a bill passes and the other is not.

In an interview with Spanish daily El Mundo on Sunday Deputy Prime Minister Theodore Pangalos said he believed that would pass the first vote, but he was less confidence in the implementation of the second account.

"That is, where we may have problems," he said. "I don't know whether some will vote our lawmakers, however, the."

Bailout not enough
With the current 110 billion bailout is not enough, go to Greece to keep the work European Heads of State and Government at another similar in size to a contribution of private banks which would agree a "voluntary" rollover of the Greek debt.

It remains uncertain whether an agreement to avert problems in the longer term will be enough. Many investors and economists believe that even if the austerity package passed this week, it will only delay an inevitable restructuring or default.

With the fate of existing support plan and the new package depending on the this week vote planned are large rallies of demonstrators was occupying Syntagma Square outside the Greek Parliament in Athens for the past month have.

Public anger was powered by Greece of the worst recession since the 1970s of a youth unemployment rate of more than 40 percent and public finances, which was broken by a debt of some 150 percent of gross domestic product.

Telekom, the post office and many hospitals are the powerful public sector Union ADEDY and its private sector equivalent GSEE due to a 48-hour strike on June 28 and 29, public transport is taken.

Many companies, including the main power company PPC that partial privatization next year is planned, have already begun roles shutdowns.

On Monday, protesters hung a huge banner from the Acropolis, which announce old rock outcrop, Athens, dominated,: "people have that makes them to never give up."

Copyright 2011 Thomson Reuters. Click for restrictions.

Read More

Banks closer to deal on Greek bailout

5:03 PM bailout, Banks, closer, Greek No Comments

Athens/FRANKFURT – banks and policy makers was nearing a deal to help a parliamentary vote on strict, who must win Greek Prime Minister George Papandreou, standard avert next week to secure funds prior to the Athens on Friday.

Despite the rejection by the conservative opposition agreed the plan again with international lenders and signs of a revolt in his own Socialist Party, Papandreou said he was confident, would pass the deeply unpopular package of spending cuts, tax increases and privatization.

"It is a moment of historical significance." "Bad things, perhaps even insolvency, will come when everyone resists", Papandreou told a press conference on the sidelines of the Summit of the leaders of the European Union in Brussels.

Scenes from the 2011 Paris air show the show has 140 aircraft and host more than 300,000 people during the June 20-26. Play with new interest in aerodynamics, automakers angle life Inc.: I'll marry you... If you get a job captured cities in the NFL Union Kampf life Inc.: daily deals not always a good deal for business

The meeting saw the euro zone Governments to discuss a new rescue package for Greece, the up to EUR 30 billion from the private sector to help Greece enormous public debt cutting could include,.

President Nicolas Sarkozy said French banks agreed voluntary rollover of Greek debt to participate in one, Spain's Jose Luis Rodriguez Zapatero said Spanish banks agreed on a scheme to buy Athens more time, while Berlin, German banks asked their intentions indicate next week to participate.

"We had many meetings with the banks and insurance companies." French President Nicolas Sarkozy, there are no difficulties, "told reporters after the meeting."

However, no new money will flow if the Greek Government shall adopt deep cuts and markets remain skeptical. Euro fell heavily in doubts that he would vote against the Government will win the day after an outsider ruling party member said.

"It's very ugly;" a complete chaos, ", said a trader in London. "There's a rumor that passed the strict not."

After a difficult series of meeting this week thrashed new Greek Finance Minister Evangelos Venizelos from an agreement with inspectors from the EU and the International Monetary Fund on Thursday, the funds needed immediately Greece.

But if the vote next week lost, international lenders financing which means that the Government money be executed within days unlikely want to share a 12 billion tranche.

Greece a package of EUR 110 billion EU/IMF loans in May 2010 accepted but now needs a second rescue mission of similar in size to the end of 2014, to fulfil their financial obligations if it hopes, again on capital markets for financing.

Binding commitments, through assessed Athens the painful measures needed, will push to get smashed public finances back in order want to international lenders.

The Government won a vote of confidence this week with 155 of 300 votes in the Parliament, showing how closely the June 29 vote on its could be austerity package.

In the sign of uncertainty to the vote, which is accompanied two days by a general strike, a Deputy of the ruling PASOK party said, that he opposed to the mix of higher taxes, spending cuts and state sales.

"Shops are shut down every day and we take anti-growth measures" party Maverick Thomas Robopoulos, a car dealer from Greece's second largest city, Thessaloniki, and one of a few entrepreneurs in the Parliament of the Reuters news agency. "I would like to speak in Parliament and try to do them to convince something."

Daily protests in Athens and other cities and an opinion poll on Friday put the conservative opposition Greece 2.1 points ahead of PASOK and showed three quarters of the Greeks against the raft of tax hikes and spending cuts, which they will be hit hard.

Greece partners have expressed growing impatience with what they face as a refusal, the seriousness of the situation. The attitude of the conservative opposition, who said that it will oppose parts of the package, has in particular European Heads of State and angry Government.

"I made it very clear that for the acceptance and the stability of Greece, it would be highly desirable, the opposition for this package of votes" said German Chancellor Angela Merkel in Brussels.

Retrieving banks on board
As well as participation of the private sector in a new rescue applies reform commitments from Greece to meet objections by many Governments as an essential element to European taxpayers the cost of storing bank balance sheets.

But it's complicated was by the fact that each schema must be voluntary, otherwise it risks defaults by credit rating agencies is binned, or at least a "credit event" could have serious consequences for the financial markets.

Banking sources told of Reuters that European banking and finance discussed officials a proposal to the existing Greek debt by another type of bond to replace ratings reservations.

The proposal is for a voluntary rollover of debt securities with a different and agencies to avoid move not comparable loan composition of Greece in default state.

"I want to comment on the current state of these discussions, I think, it is for us to have these conversations first and then reports you the results", said Merkel. "I don't think it would be wise to enter all the numbers." We have no hard figures yet.

Papandreou promised at the EU Summit in Brussels, radical economic reforms prevail, after Venizelos secured with EU and IMF inspectors to additional tax rises and spending cuts to a financing agreed gap within a five year strict 3.8 billion euro plug in the value of EUR 28.4 billion plan.

On Thursday, Venizelos announced additional measures, including extra spending cuts, lowering the threshold minimum income tax and measures for the introduction of a special "solidarity levy,', the ordinary Greeks are hit even harder.

Employees at Greece dominant power generating PPC that privatization next year is planned, were in parallel 48-hour strike for a fifth day on Friday. The Union opposes sale 17 percent in the firm plans and said that the work action will lead to power outages.

"Many of the change of the guard at the Ministry of Finance of the low income groups and those who consistently pay their taxes would have helped thought", ethnos said a middle links daily, which usually is supportive of the Government. "Unfortunately those hopes were dashed."

Copyright 2011 Thomson Reuters. Click for restrictions.

Read More

Greek PM rebuffs strict opponent, swears June vote

9:10 PM Greek, opponent, rebuffs, strict, swears No Comments

Athens - the Greek Government defended its new austerity package from attack in Parliament on Friday, it was the only way to avert bankruptcy, and made a new call for opposition to the plan back say.

Prime Minister George Papandreou plan doubled almost the belt measures agreed for 2011 more tightly strapped already with the International Monetary Fund and the European Union, after the lenders assess that Athens outlined under his bailout had missed targets.

The ruling Socialist Party 300 seat of its members has 156 members in the House but more and more expressions discomfort proposals including cut to increase expenditure and taxes, to reduce the deficit by €6.5 billion more this year than first planned.

Papandreou is seeking for more austerity plan passed votes by 2015 despite strikes, mass street protests and dissidents within his own ruling Socialist Party.

"The medicine is not pleasant and the treatment requires dedication and commitment," he told Parliament.

"No Prime Minister of the host country wants to go with a beggar tray and collect money from other countries..." "Certainly not, but I do it for Greece."

Papandreou fights, to obtain not only opposition parties, but also his reluctant PASOK party behind the strategy, a condition to receive more aid from international lenders, the Greece a 110 billion euro ($160 billion) emergency funding lifeline last year threw.

PROTESTS AT PARLIAMENT

Released on a weekly schedule of Parliament legislator starts the Chamber for Economic Affairs discuss the midterm plan in the Committee on Wednesday.

That is with a national strike by trade unions expected that thousands of demonstrators Syntagma Square, Parliament's front stoop and the site of two weeks the nightly grassroots protests are the same.

The place is also the convergence point of daily marches of employees in the company for privatization, the is the Government promise against 50 billion euro in the sell-off of State-owned enterprises to increase by 2015.

Born from the tsunami "Mess", radio station gives voice to recovery Palin e-Mails show their Office Interior Sarah Palin email trivia, FBI agents seeking injunction against manufacturer tainted wipes computer glitch grounds flights on US Airways Loughner can not rampage describe, lawyers say watch out for falling gas prices

In a televised speech to the nation Papandreou invited proposals for the plan from opposition parties and with Brussels on a June 23-24 EU Summit called for cooperation to improve the Athenian position in talks.

"I call the leadership of all parties to cooperate," he said in a televised announcement. "There are many and important points where we converge." "With a national consensus we can negotiate together with our partners."

In a move to reduce the resistance of the main opposition party new democracy measures said Finance Minister George Papaconstantinou the Government consider template draws a new tax bill in September cut VAT and corporate taxes and said he hoped that Parliament would approve the medium-term plan by the end of June.

The IMF and the EU have called for broad political consensus in Greece before they owed the euro zone Member give more money. But the main opposition groups have sworn, voting against the new measures, saying economic growth will be stifled.

"The medium-term plan is unreliable, unfair and ineffective." It is a de-facto confession of failure of the rescue operation, "Said new democracy party spokesman Yiannis Mihelakis in a statement."

European officials are still trying, a plan to develop the private investors, for some of the costs for the new financing plan, amounting approximately to one additional 120 billion euros including 30 billion from the sale of the Greek State assets are expected to hit.

Figures on Thursday showed the economy is in worse shape than first 5.5 per cent on the previous year fears, with gross domestic product tumbling in the first quarter.

Copyright 2011 Thomson Reuters.

Read More