Two interesting
stories regarding Greece
have hit the wires today.
It´s difficult to
know if they are related.
First, Der Spiegel claims the agreement negotiated between German chancellor Merkel and French president Sarkozy has collapsed;
Second, Bloomberg reports Europe will pressure Greece by withholding half of the next tranche of
money.
The pattern is for Eurozone
officials and the IMF to deny
Der Spiegel claims, only to find
out later that Der
Spiegel sources were impeccable.
Is it different this time?
Voluntary Rollover
Plan Off the Table?
Please consider Germany 'dismisses
Greek debt compromise
plan'
A German
compromise plan to resolve a dispute
with the European Central
Bank over the Greek rescue
that was reported by Der Spiegel magazine is
no longer on the table, a government
source said Sunday.
Der Spiegel had reported ahead of its Monday issue that the German finance ministry called for a beefed-up version
of Europe's temporary bailout mechanism lending to Greek banks to insure they have adequate collateral with the ECB.
It would boost the
effective lending capacity
of the Emergency Financial Stability Facility (EFSF) to 440 billion euros ($629 billion) and see member states double the amount of guarantees they provide the fund.
Germany's share of guarantees would climb to 246 billion euros from
123 billion euros, according to the report.
But a German official, who
spoke on condition of anonymity,
said that while "several
options" were being debated to involve private creditors in an Athens rescue, the reported proposal was "no longer on the agenda".
The source added that the
initial plan had differed
from the reported proposal in "key
aspects".
German officials say they seek
a plan with as few "unwanted
side effects" as
possible.
Europe May Withhold
Half of Greek Payment
Bloomberg reports Europe May Withhold
Half of Greek Payment
European governments weighed withholding half of Greece’s next 12 billion-euro ($17.2 billion) aid
payment, seeking to keep the country solvent while maintaining pressure on
the government to slash the debt
that pitched the euro
area into crisis.
Euro-area finance ministers may
authorize only a 6
billion- euro loan to tide
Greece through bond redemptions in July, while further aid hinges
on Greek budget cuts, Belgian Finance Minister Didier
Reynders said.
“We will in any case try to release the necessary funds for the short term,” Reynders told reporters before a meeting of euro-area finance ministers
in Luxembourg tonight.
Tonight’s euro-area finance ministers’ meeting coincided
with the start of a three-day Greek parliamentary debate in Athens over a confidence vote in a new cabinet at what Papandreou called a “critical crossroads.” Papandreou has 155 seats
in the 300-seat parliament.
Germany, which as Europe’s
largest economy is the biggest guarantor of aid packages to Greece, Ireland and Portugal, insists
on an “ambitious” economic
overhaul in Athens,
Finance Minister Wolfgang Schaeuble
said.
“We will surely work on laying the groundwork for paying out the tranche,” Schaeuble
said. “It also depends on Greece making the necessary decisions with a fundamental consensus of the political
parties so that we can be
confident that Greece will live up to its commitments.”
While Germany bowed to European Central Bank and French demands
not to compel investors
to buy new Greek bonds as
old ones expire, the lines are blurry between a “voluntary”
and “compulsory” rollover
that would lead rating companies to declare Greece in default.
On the table are incentives for bondholders
to maintain their exposure to Greece, said Luxembourg Prime Minister
Jean- Claude Juncker, chairman of the talks. He ruled out an agreement tonight
on a new three-year package for Greece,
pointing to July for a “final and overall answer.’’
Mish
GlobalEconomicAnalysis.blogspot.com
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