Greece heading for crucial loan as markets rally
ELENA BECATOROS and GEIR MOULSON,Associated Press
BERLIN (AP) — Greece will receive its next batch of bailout loans in time to avoid a disastrous default, the country's finance minister said Tuesday, as stock markets rallied on hopes that policymakers around Europe were preparing a comprehensive solution to the debt crisis.
Reports that European leaders are considering bolder moves to relieve Greece and other countries of their debt burden have buoyed spirits in financial markets, though officials in Chancellor Angela Merkel's government downplayed such speculation ahead of her meeting later with Greek Prime Minister George Papandreou.
The current plan is to have Greece implement painful debt-reduction measures in exchange for rescue loans. Greece relies on funds from last year's €110 billion ($149 billion) package, and European leaders have also agreed on a second €109 billion bailout, although some details of that remain to be worked out.
Greece's international creditors are withholding the next installment of the first bailout loans until a review of the reforms is completed in the coming days. Without the money, Greece faces bankruptcy in mid-October, potentially sending shock waves through the financial sector in Europe and abroad.
"The decision will be made in October," Greek finance minister Evangelos Venizelos said. "The disbursement will be decided in time, in line with the course of our funding needs."
Speaking above the sound of chanting from protesting ministry employees and tax office workers outside his department, Venizelos said the country had made great efforts to achieve its fiscal targets, but that a "hyper-effort" was necessary to fully meet its commitments.
Some experts, however, say the current course of austerity is untenable and that Greece will need bigger debt relief.
There is growing speculation in the markets that Greece's bailout creditors will look to impose bigger losses on Greece's private bondholders as well as recapitalizing Europe's banks and boosting the size of the eurozone's rescue fund. Talk of such a comprehensive package has helped turn sentiment around in stock markets this week following last week's turmoil.
So far, there's been no confirmation from Europe's capitals that such a comprehensive solution is being planned. German officials have downplayed the notion of an increase to the rescue fund anytime soon.
Greece has to meet the terms demanded from its bailout creditors if it's to get the €8 billion ($10.9 billion) it needs to pay its bills from next month.
Venizelos said representatives from the International Monetary Fund, European Commission and European Central Bank will return to Athens this week. The so-called troika suspended their review in early September amid talk of missed targets and budget shortfalls.
In Berlin, Greek premier George Papandreou told a conference of the Federation of German Industries that "we are borrowing to repay" — but also stressed that Europe needs to show it can get its act together.
"I can guarantee that Greece will live up to all its commitments," Papandreou said ahead of the evening meeting with Merkel.
The Greek government recently announced new austerity measures, including pension cuts and tax hikes. A new property tax has provoked widespread anger but Venizelos said lawmakers from the governing Socialist party will back the measure in a Parliamentary vote later Tuesday.
Greeks have been outraged by the new measures after a year of austerity, and unions have responded with strikes and protests. Public transport workers walked off the job Tuesday for two days, and were to be joined by taxi drivers on Wednesday. Tax office and customs workers were also on strike.
Given the sacrifices being made by Greeks, Papandreou said the "persistent criticisms leveled against Greece are deeply frustrating."
"If people feel only punishment and scorn, this crisis will not become an opportunity — it will become a lost cause," he told representatives of Germany's leading industries.
He added that Europe needs to prove it can get its act together. Germany, Europe's biggest economy, has been a sometimes-reluctant leader of the rescue efforts.
Merkel, also speaking at the industry forum, pledged support for Greece but didn't promise any specific new measures. She expressed "absolute respect" for structural reforms pushed through by Papandreou's government.
"The all-important thing is — and we will provide every assistance that is wanted from the German side — that Greece wins back confidence; that we get out of this terrible development that there is bad news every month; and that the impression arises on the markets that Greece is on the right track," she said.
However, she once again rejected the idea of pooling European countries' debt — for example by issuing joint so-called eurobonds. And she said Germany is "not available" to provide another economic stimulus.
On Thursday, Germany's parliament is to vote on beefing up the powers and lending capacity of the eurozone's €440 billion ($595 billion) rescue fund — a facility that already has intervened to help Ireland and Portugal.
Becatoros reported from Athens. Derek Gatopoulos in Athens contributed.