Details on Greek rescue plan set to be unveiled
Total package estimated at €120bn with €1bn contribution from Ireland
TENSIONS eased in government debt markets yesterday as investors awaited details of the Greek rescue plan.
But leading American economists warned that the pressures on eurozone countries might continue for several years, and could spread to the US, UK and Japan.
In Brussels, EU Economic and Monetary Affairs Commissioner Olli Rehn said discussions on the financial aid package for Greece should conclude in the next few days.
"I cannot provide you with details today, as we are about to conclude talks," Mr Rehn said.
"But I can assure you that when we meet next time, and that will be soon, I will give you all the details."
Trade union leaders in Greece were briefed on the extra austerity measures the EU and IMF will demand as a condition for meeting Greece's borrowing requirements for the next three years at moderate interest rates.
"I got a taste of a very tough package," Yannis Panagopoulos, head of Greece's biggest union, said after a meeting with Prime Minister George Papandreou.
The package is now expected to total around €120bn. If agreed, euro countries would borrow some of this and lend it on to Greece, with the rest supplied by the IMF. Depending on the size of the IMF loans, Ireland's share could be €1bn.
In theory, there should be no cost to the taxpayer, since loans would be passed to Greece at the same interest rate, if not higher. In practice, there may be little or no point in small countries with large deficits taking part in the scheme, although each state has to approve it.
The interest rate on Greek 10-year government bonds fell for the first time in four days, with the premium over German rates plunging one percentage point to 5.93pc.
There were even more dramatic changes on two-year bonds, where most of the panic about default has concentrated.
The yield on Greek bonds dropped 3.6 percentage points, while Irish yields were down 0.69 points and Portugal's dropped 0.61 points.
However, few analysts believe the crisis is over, and several think it could take on a global dimension.
Harvard University economist Martin Feldstein said Greece would eventually default on its bonds and other euro-area nations may follow, most probably Portugal.
"Greece is going to default despite all the talk, despite the liquidity package," Prof Feldstein, said in an interview on Bloomberg Radio.
"Those are enormous cuts, impossible for Greece to live with." He has always claimed the euro would prove an "economic liability".
Nouriel Roubini, the New York University professor who forecast the global crash more than a year before it began, said sovereign debt problems from the US to Japan, Britain and Greece would lead to higher inflation or government defaults.
"The 'bond vigilantes' are walking out on Greece, Spain, Portugal, the UK and Iceland," Prof Roubini said.
"Unfortunately in the US, the bond-market vigilantes are not walking out."