- Taxes on some wealthy French top 100 pct of income: paper
- Shooting death of gay man rocks New York's cradle of gay rights
- Justin Bieber, Taylor Swift big winners at Billboard Awards
- Imran Khan's party wins revote in Karachi, protests expected
- Hezbollah steps up Syria battle, Israel threatens more strikes |
Greece and EU close ranks, say no bailout
DAVOS, Switzerland |
DAVOS, Switzerland (Reuters) - Greek and European Union officials closed ranks on Friday, insisting there was no chance of a Greek default or an EU bailout and that Athens would do whatever it takes to cut its burgeoning deficit.
"Solidarity is possible, will exist. A bailout is not possible and will not exist," EU Monetary Affairs Commissioner Joaquin Almunia told Reuters Insider TV.
Greek Prime Minister George Papandreou, also at the World Economic Forum in Davos, promised to do all that was required to cut the deficit and restoring confidence.
"Greece is in a situation where we need to take very strong measures and structural changes in our country," he said. "We're determined to implement the program."
The euro zone has pledged to cut its budget deficit this year to 8.7 percent of gross domestic product from over 12 percent and return to the EU's 3 percent cap by 2012.
But fears that Athens will not be able to rein in spending have continued to haunt markets and put pressure on the euro, fuelling speculation the euro zone would eventually step in.
A senior euro zone official said on Friday that there were no formal talks or preparations in any European institutions to help Greece financially and that the EU strategy toward Greece was to continue pressing hard for budget cuts.
However, there may be informal talks among officials in some EU capitals over what to do in a worst-case scenario, said the official, who declined to be named.
Germany and France have denied media reports they were working on an aid plan for Greece, and the EU Treaty bans the rescue of any member state by another or by the Union.
"I can certainly say that in institutional terms the European Union is not preparing anything," said the official.
ALL IN THE TIMING
Greece partially regained investor confidence on Monday when it succeeded in selling 8 billion euros of 5-year bonds, albeit at a high price, and announced plans to sell more in February.
But Finance Minister George Papaconstantinou said the next bond would have to be carefully timed. It would be disastrous if his country had to finance all this year's debt requirements at current rates, he said.
"It's true that if we service the whole 54 billion (euros) on those terms, it will be pretty disastrous for our ability to do other things," he told Reuters.
"We'll time our next issue to make sure we have good market conditions or at least an acceptable compromise given our financing needs and the conditions in the market."
He said there was no immediate need for further funds and he expected Greek debt spreads over benchmark German bonds to narrow once markets saw the government's deficit-cutting program being implemented.
Other euro zone members, also viewed as vulnerable because of large debts, have also pledged to act.
Spain announced a plan on Friday to save 50 billion euros ($70.20 billion) including government spending cuts totaling 4 percent of GDP.
And Portugal this week pledged to intensify budget consolidation next year and onwards as ratings agencies demanded a clear plan of further budget deficit cuts after this year's budget plan failed to diminish their concerns.
Assurances by EU officials over Greece initially calmed markets on Friday, but uncertainty later returned.
The premium investors demand to hold Greek government bonds over benchmark German Bunds rose to 380 basis points after touching a session low of 366 bps on reports that Greece would get aid. The spread had reached 395 at the start of the day.
The cost of insuring Greek government bonds fell to 399,500 euros per 10 million of exposure from a record 422,500 euros at the New York close on Thursday. It fell as low as 395,000 euros during Friday's session before rising again.
Greece also met the International Monetary Fund in Davos but Papaconstantinou told Reuters it was not asking for aid.
Athens is receiving technical advice from the IMF on ways to cut its budget deficit.
Papaconstantinou ruled out any departure from the euro zone in an interview with Reuters Insider.
"There is absolutely no question of Greece leaving the euro. No country in the euro zone will ever leave," he said.
The European Commission will next week make recommendations on Greece's plan to reduce its deficit. Greek officials discussed that plan with Almunia on the sidelines of the WEF.
Almunia said Greece had set "ambitious targets".
Asked whether they were realistic, he told Reuters: "That depends on political determination. I think the new element we have seen in these days is the full political determination." (Writing by Lin Noueihed, Editing by Mike Peacock)
- Tweet this
- Share this
- Digg this