EU, Germany deny report of Greek aid

ATHENS/BRUSSELS (Reuters) - The European Union and Germany on Monday denied a report of a 20-25 billion euro (£17.6 - £22 billion) aid plan for Greece, and Athens pledged again to take new steps if needed to keep tough deficit-cutting plans on target.

The European Commission and Germany’s finance ministry dismissed a report in German weekly Der Spiegel on Saturday that the finance ministry had sketched out a plan for aid from euro zone states worth 20-25 billion euros.

“I have no comment on such a plan that does not exist and is denied even by the alleged source of it,” European Commission spokesman Amadeu Altafaj told a news briefing in Brussels.

“They (European Council of EU leaders) are ready and they are determined to take firm, coordinated action if needed, but there is no such plan, there is not a single euro, because Greece has not requested one single euro of financial aid.”

In Berlin, a finance ministry spokesman told a news conference Germany had not made a decision on aid and expected Greece to be able to refinance in April.

“The government has not as yet made any decisions on an aid package,” the spokesman said. “That applies to the question of whether (there will be any aid) as well as to any concrete instruments and the question of the volume (of any aid).”

Greece’s central bank governor meanwhile said the country was prepared to take extra fiscal steps to make sure it meets its deficit-cutting targets though he said financial markets were over-reacting to the country’s financial woes.

“Even if some risks materialise -- like (poor) growth -- the government is prepared to take immediate corrective action,” George Provopoulos, also a member of the European Central Bank’s Governing Council, told Bloomberg in an interview.

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“The government has said already on several occasions that it will take any additional measures required in order to achieve its goal,” Provopoulos was quoted as saying.

Der Spiegel had reported that “initial considerations” by the German finance ministry were for financial aid for Greece to be calculated according to the proportion of capital each country holds in the European Central Bank.

Greece has pledged to cut its budget deficit by 4 percentage points to 8.7 percent of gross domestic product (GDP) in 2010.

In another Der Spiegel report, Greek Prime Minister George Papandreou told Germany he was not seeking aid, and criticised the EU Commission for failing to ensure member states adhered to the EU’s Stability and Growth Pact that limits budget deficits.

“The union could in the past have more rigorously policed whether the stability pact was being observed -- with us too,” he said. “In future we should allow the European statistics office direct access to individual member states’ data.”

“We suggested that, but not all countries wanted to have so much transparency,” Papandreou said.


Financial markets have hammered Athens this year over worries it will not be able to refinance debt coming due this year, and the fallout has seen other highly-indebted EU states suffer, along with the euro itself.

A good reception last week for a syndicated 5 billion euro, 15-year Spanish bond fuelled speculation that Greece may launch a planned 10-year syndicated bond as soon as this week.

The premium that investors demand to buy 10-year Greek government bonds rather than German benchmarks fell on Monday as markets continued to speculate on the prospects for a bailout.

The 10-year Greek/German government bond yield spread narrowed by three basis points on the day to 314 bps, the narrowest since February 17.

In comments to Bloomberg on the way financial markets were reacting, Provopoulos was quoted as saying: “They take advantage of the weak link to make profits.”

“It’s clear that there is a certain degree of overshooting. Given the high degree of uncertainty in the markets, one should not expect that the situation will normalise overnight.”

Greece’s deficit rose to 12.7 percent of gross domestic product in 2009, way above the EU’s cap of 3 percent, and Athens needs to sell some 53 billion euros of debt this year, including at least 20 billion euros in April and May.

Reports that Greece used derivatives contracts with U.S. investment banks to mask the size of its debt highlight the need for guidelines defining the legitimacy of sovereign debt, a U.N. official told Reuters on Monday.

Yuefen Li, head of the Debt and Development Finance Branch at the United Nations Conference on Trade and Development (UNCTAD), said the reports that the previous Greek government had pledged future revenue streams [ID:nLDE61E1LC] raised questions of transparency.

In another report, Germany’s Handelsblatt business daily on Monday said German Finance Minister Wolfgang Schaeuble would favour using bilateral aid to help Greece in the event that Athens defaults on its debt commitments.

Reporting by Athens, Brussels, Berlin and Geneva bureaux; writing by Stephen Nisbet; editing by Robin Pomeroy