Archive for the ‘Europe’ Category
The Fitch financial services company is again downgrading the credit rating of Greece, saying that the debt-ridden country is “highly likely” to default on its financial obligations even after securing a new bailout from its European neighbors.
Fitch said Wednesday it has cut Greece two notches (from CCC to C), pushing the credit standing for the Athens government deeper into junk status. The ratings company took the action after Greece earlier this week secured a new $172 billion international bailout and negotiated a $142 billion writeoff of the debt it owes large financial institutions.
While Greece has reached a general agreement on elimination of more than half the debt its owes private creditors, it must now negotiate the specific terms of the writedown with individual banks and other investors. Greek officials say that when about two-thirds of its lenders agree to cut the amount the are owed, they will impose the same debt reduction involuntarily on its remaining lenders.
Fitch said such involuntary debt cuts for the private creditors will amount to a Greek default, and called the arrangement “distressed and de facto coercive.”
Greek Prime Minister Lucas Papademos says the country has a lot of work to do before it starts to collect the new bailout money, its second rescue package in two years.
The Greek parliament has agreed in principle to the package of spending and job cuts demanded by the European Union and the International Monetary Fund. The lawmakers must now pass all 79 specific measures included in the package before getting the bailout funds.
The bailout will likely avoid the bankruptcy Greece faces if it cannot pay investors $19 billion when government bonds come due, March 20th.
The rescue package requires Greece to make deep and unpopular spending cuts. They include a 22 percent cut in the country’s minimum wage and the elimination of 15,000 government jobs.
Thousands of Greeks have held sometimes violent street protests against the cuts, saying they have already sacrificed enough. More protests were planned for later Wednesday.
The head of the EU delegation to the United States, Ambassador Joao Vale de Almeida, told VOA in an exclusive interview that the bloc has learned a lot from the crisis, namely the need for a mechanism to deal with emergency situations, an improved level of economic governance and solidarity among all members of the 17-nation bloc that uses the euro.
“I think we learned a lot. We learned a lot about the means that we need to have to deal with emergency situations,” said the ambassador. “We didn’t have them before. We created, we developed them to deal with the cases like Greece and a few other countries.”
“Secondly, we learned that our governance system was not yet at the right level of sophistication, and we are in fact changing a lot; if not, there is a small revolution going on inside the euro area in the way we deal with what we call the economic governance. There is a lot being changed. And thirdly, I think we learned a very simple lesson. When you are part of a system, there has to be solidarity,” he added.
Greece got a $145 billion bailout last year and is, by far, the biggest recipient of international aid in eurozone history. Yet Greece accounts for just two percent of the eurozone economy.
Some information for this report was provided by AP, AFP and Reuters.
Eurozone finance ministers are set to approve a new $171 billion bailout for Greece when they meet in Brussels on Monday.
French Finance Minister Francois Baroin said that after months of negotiations over terms of the deal for debt-ridden Greece, an agreement is in sight for the country’s second bailout in two years.
“We have all the elements for an agreement,” Baroin said on Monday. “From now on, the elements of a voluntary participation of the banks, of the private creditors and of the public creditors – the states, the central banks – are fully in place.”
U.S. Treasury Secretary Timothy Geithner said Sunday that Greece has adopted a very strong and difficult package of reforms that deserves the international community’s support. The United States encourages the International Monetary Fund to support the loan for Greece, Geithner said.
The Greek government fulfilled European Union demands last week and approved a new round of austerity measures that includes a 22 percent cut in the country’s minimum wage and the elimination of 15,000 government jobs.
Greece said that without the bailout, it would not be able to pay investors $19 billion in debt when government bonds come due next month. In addition to the international rescue, the government is nearing completion of negotiations with private creditors to cut in half the debt it owes them — a $131 billion reduction.
Even as the Greek government has complied with the international demands for more austerity, the country’s workers have repeatedly taken to the streets in opposition. Thousands of Greeks protested in Athens Sunday against the massive spending and salary cuts. The protests were generally peaceful, but a group of youths broke away from the main march and threw rocks and bottles at riot police, who responded with tear gas.
Millions of Greeks complain that they have already sacrificed enough, saying they do not know how they will cope when their salaries and benefits are slashed. One Greek housewife, Panagiota Petraki, said she does not see better times ahead for her homeland.
“I don’t see light on the horizon. Unfortunately no matter how many loans we receive, if we don’t stand on our own two feet we will never see a recovery in Greece,” she said.
Greece is mired in the fifth year of a severe recession. The country’s fortunes won’t improve until the economy does, said retired teacher Michalis Vikendios.
“Even if they cut all pensions, all benefits for the unemployed, and disabled people, the problem will not be solved,” he said. “It’s a dead end. No matter how much money we get if commerce doesn’t start working, if they don’t write down debt, we will never exit the crisis.”
The apparent agreement on the latest Greek rescue deal came as numerous European leaders were weary of the long negotiations with the country’s leaders, and missed deadlines on imposing spending cuts the Athens government has earlier agreed to. Some leaders in northern European countries with much stronger economies than Greece openly suggested that it be expelled from the 17-nation bloc that uses the common euro currency.
But analysts warned that if Greece defaulted next month, it could have catastrophic consequences for the eurozone, and possibly lead to a sharp downturn in the world economy. It was an argument that eventually led to agreement for the new bailout.
Some information for this report was provided by AP and AFP.
Thousands of Greeks have taken to the streets of Athens to protest severe austerity measures as eurozone ministers prepare to vote on a new $171 billion bailout for the debt-crippled nation.
As the demonstrators marched, Greek Prime Minister Lucas Papademos left for Brussels where he was to hold talks with officials ahead of Monday’s meeting of the finance ministers.
The ministers are expected to approve the loan after the Greek parliament last week approved a new package of spending and job cuts.
The European Union and International Monetary Fund demanded that all Greek political parties agree on the austerity plan before final approval of the bailout loan.
Greece faces bankruptcy if it cannot pay investors $19 billion in debt when government bonds come due next month. The government is negotiating a bond swap with the creditors that would save the country billions of dollars.
Some information for this report was provided by AP, AFP and Reuters.