Greece is gearing up for another tough week of negotiations on the country’s crucial second bailout as it tries to revive talks with private investors and has its economy scrutinized by a team of international debt inspectors.
“This is a critical time for the Greek economy … the negotiations are very difficult,” government spokesman Pantelis Kapsis said Monday.
“It is understood that there will be renewed pressure (from the debt inspectors) to speed up structural reforms.”
The mission heads of inspectors from the so-called “troika” _ the International Monetary Fund, European Central Bank and European Commission _ are expected to arrive in Athens on Friday, the Finance Ministry said. The technical teams, meanwhile, will begin work in Athens Tuesday, the same time Horst Reichenbach, the European Commission’s task force chief for Greece, is also due for a four-day visit.
Two top Greek negotiators, public debt management agency head Petros Christodoulou and chief economic adviser George Zanias, were heading to Washington Monday to attend the IMF board meeting on Wednesday, which would be dealing with Greece, the Finance Ministry said.
An integral part of the euro130 billion ($166 billion) second bailout is a bond swap deal with private creditors that is crucial to avoid a devastating default. But those talks appeared close to collapse Friday amid disagreements over the interest rates of the new bonds. The negotiations are expected to resume this week, probably Wednesday.
Known as the Private Sector Involvement, or PSI, the talks aim to reduce Greece’s debt by euro100 billion ($127.8 billion) by swapping private creditors’ bonds with new ones with a 50 percent lower face value. Without it, the country could suffer a catastrophic bankruptcy that would send shock waves through the global economy no teletrack payday loans.
“Despite the difficulties, there is optimism for the outcome” of the second bailout deal, Kapsis said.
Charles Dallara and Jean Lemierre of the Institute of International Finance, a global body representing the private bondholders, met in Athens last week with Prime Minister Lucas Papademos and Finance Minister Evangelos Venizelos, but the talks were suspended on Friday, with the IIF saying that despite Greek efforts, there had not been “a constructive consolidated response by all parties.”
People familiar with the talks said that while a deal appeared close last Thursday, a problem arose Thursday night over the interest rate the new bonds would have, with the International Monetary Fund and Germany seeking a coupon rate below 3 percent _ a very low rate for bonds that are paid off in 20 to 30 years’ time.
The people spoke on condition of anonymity to disclose details of the highly sensitive negotiations.
An interest rate that is that low is unlikely to be accepted by the banks and investment funds holding government bonds _ a crucial issue as the bond swap must be voluntary if the deal is not to be considered a “credit event” that could trigger the payment credit default swaps _ essentially insurance against a default.
Greece is running out of time to clinch a deal, as it faces a massive euro14.5 billion bond redemption on March 20 that it cannot afford to pay.
The second bailout comes on top of a first, euro110 billion rescue package that Greece has been relying on since May 2010, after years of overspending and waste left it facing an untenable public debt.
Federal Reserve Bank of St. Louis President James Bullard pointed out pitfalls in a Fed plan to forecast interest rates, highlighting a debate among officials on whether the move will provide clarity about policy.
Bullard told reporters on a conference call yesterday that
Payroll growth in the U.S. beat forecasts in December and the unemployment rate dropped to the lowest level in almost three years as the economy gained strength heading into 2012.
The 200,000 increase followed a revised 100,000 gain in November that was smaller than first estimated, Labor Department figures showed today in Washington. The jobless rate unexpectedly fell to 8.5 percent, while hours worked and earnings climbed.
Chinese Premier Wen Jiabao said business conditions may be
Germany and France send two key government officials to fill positions at the European Central Bank today, setting off a struggle for the job of chief economist.
Joerg Asmussen and Benoit Coeure join the ECB
President Barack Obama, saying he
A man from St. Louis County is the second person to seek damages from Schnucks after falling ill during an E. coli outbreak linked to lettuce sold at local stores, according to a lawsuit filed Thursday in circuit court.
In mid-October, Charles Meyer, 61, ate romaine lettuce and other salad bar items several times from the Schnucks in Cool Valley. Meyer later developed an E. coli bacterial infection and was treated at Mercy Hospital in Creve Coeur, where he stayed in the cardiac unit for several days.
Meyer has not regained his previous health and strength since the illness, according to the lawsuit.
Mary Kozlowski filed suit earlier this month against Schnucks after she suffered permanent kidney damage from an E. coli infection after eating salads from the Des Peres Schnucks.
Federal health officials tagged romaine lettuce as the likely culprit of the E on line pay day loans. coli outbreak that sickened 60 people across 10 states this fall. Investigators determined that romaine lettuce from salad bars at nine Schnucks locations was the most common denominator in the illnesses.
The contamination probably occurred at a farm before the lettuce reached the stores, according to a report from the federal Centers for Disease Control and Prevention.
Both lawsuits also name Vaughan Foods of Oklahoma, which supplies romaine lettuce to Schnucks. The plaintiffs are represented by the law firms Aleshire Robb in Springfield, Mo., and Marler Clark in Seattle.
Taiwan President Ma Ying-jeou said his rapprochement with China will encourage other nations to strengthen trade with the island and make it less dependent on the mainland, rebutting opposition criticism that he
China’s chronically high inflation rate fell to a lower than expected 4.2 percent in November, paving the way for authorities to further ease credit to support growth.
The National Bureau of Statistics said Friday that falling food prices and a high base from a year earlier helped to bring inflation down from 5.5 percent in October.
The decline gives China’s leaders the leeway to ease policies that were imposed to cool an overheated economy but recently have fanned fears growth might be stifled at a time when hopes are pinned on a robust China to help offset the malaise in Europe and the U.S.
“Inflation is marching south at an aggressive pace,” Alistair Thornton, an economist with IHS Global Insight, said in a research note.
Data for November “highlighted strong downward pressure amid an increasingly gloomy global outlook,” it said.
China has already begun relaxing reserve requirements on banks to help ease a cash crunch and reopen a flow of liquidity needed to keep growth on track.
Beijing is treading a thin line as it strives to support job-creating growth while avoiding re-igniting inflation that can undermine public support for the ruling communist party because it erodes the economic gains that underpin their claim to power saving account payday loan.
“The challenge for policymakers is to enact measures that boost domestic demand and to loosen credit controls somewhat without stoking inflation and property price bubbles,” said Jing Ulrich, JP Morgan’s chairwoman for global markets.
Incomes are rising but gains are increasingly unevenly distributed.
Food costs, a major component of the consumer price index and especially sensitive in a society where poor families spend up to half their incomes on food, rose 8.8 percent, the National Bureau of Statistics said.
China’s latest bout of perilously high inflation, fueled by a binge in bank lending unleashed by stimulus meant to fend off the global crisis, peaked at 6.5 percent in July.
Premier Mario Monti urged lawmakers Tuesday to accept his financial rescue package, including new and higher taxes, saying Italy had risked running out of money to pay state salaries and pensions.
Lawmakers on the right and left have been grumbling over his 2-day-old rescue plan, including pension reforms to make Italians work far longer and a revived home property tax.
Monti’s rescue plan, approved by his Cabinet on Sunday aims to pull Italy back from the brink of default on its staggering sovereign debt, a scenario that could doom the eurozone and worsen economic crises across the globe.
“Parliament is sovereign, time is short, the room to maneuver is very little,” Monti said on a state TV talk show when asked about political leaders’ insistence in Italy that the austerity plan be softened.
He said it is “premature” to decide if his 3-week-old government would resort to a confidence vote in a bid to get his rescue recipe approved by Parliament quickly and intact.
With no political base in Parliament _ Monti and his ministers are all technocrats asked to save Italy’s finances _ the government would topple if it loses a confidence vote, a prospect that could trigger catastrophe in global markets.
Monti, an economist and former EU commissioner, announced emergency measures on Sunday that seek to save euro30 billion through austerity measures and reinvest euro10 billion of savings from those measures to enhance growth, which has been stuck at zero for a decade.
Much of the austerity strategy hinges on new or higher taxes, such as the higher excise tax on gasoline and diesel fuel, which already took effect Tuesday. News reports said it would mean it would cost consumers an extra euro5 or euro6 (nearly $7-8) every time they fill up their car.
Monti called the hike in fuel taxes “indispensable” and needed to help keep local public transport functioning.
“We didn’t have to look far. Greece represented what could have happened to Italy,” Monti said, evoking the drastic situation of its fellow eurozone member across the Adriatic.
“We lived well, consuming the wealth produced by past generations instead of producing more,” he said. Under existing pension system reforms over the last decade or so, many Italians could retire at as much as 80 percent of pay in their mid-50s. With Italians enjoying exceptional longevity, the pension payments are becoming nearly unsustainable.
Italy’s public debt is amounting to a staggering euro1.9 trillion, or 120 percent of its GDP.
Asked if Italy had risked being unable to pay its public servants, Monti replied, grimly: “It was certainly possible” that salaries as well as pensions ran that risk.
On Tuesday, the government approved the release of euro4.8 billion ($6.4 billion) from state coffers to fund strategic infrastructure projects aimed at stimulating economic growth. The funds will pay for highway projects, high-speed railways and retractable underwater barriers to help protect Venice from flooding.
Economists have mixed views on how effective infrastructure programs are for spurring economic growth, with most favoring privately funded projects for better stimulus. Still, longer-term projects such as railways usually require state funding because the investment period is too long for many investors.
Sunday’s Cabinet emergency decree allows the funds to be released immediately, but Parliament must still convert the measures into law.
The new funding includes euro2 billion to upgrade the Treviglio-Brescia and Milan-Genoa railway lines, both in the north, to high-speed, euro598 million for highways, and euro600 million for the Venetian lagoon mobile barriers, a project already more than two years behind schedule due to financial problems and designed to protect Venice from periodic high tides. The projects are expected to stimulate growth by putting unemployed people to work and to keep construction contracts flowing.
Unicredit economic analyst Chiara Corsa said the measures appear “sufficiently bold” to allow Italy to balance its budget by 2013,” even with recession looming.
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