Monday 26 February 2018

Debt Crisis: Greek leaders strike deal with EU/IMF/ECB in bid to stave off messy default

Greek Prime Minister Lucas Papademos
Greek Prime Minister Lucas Papademos reporters

GREEK leaders have struck a deal with the EU/IMF/ECB troika in a bid to secure billions in bailout loans necessary to stave off a messy default.

The euro and stock markets gained on the news.

The euro added on 0.2pc to $1.3284 while the FTSE 100, the DAX and France’s CAC also gained.

"Yes, there is a deal," the Reuters news agency quoted a Greek government official as saying.

European Central Bank chief Mario Draghi also confirmed a deal had been down after talks broke down over €300m in pension cuts.

“This afternoon we will be having a euro group meeting with the ministers, and we will be having a full report of this, the agreement, and also a discussion of the further steps,” Mr Draghi said.

He added that any talk of ECB involvement in sharing Greek losses are “unfounded” although the deal does involve bank creditors taking a write-down.

The eurosystem as a whole is understood to hold €55bn in Greek debt with some purchased under the ECB’s securities market’s programme and the rest held in national central banks.

But the ECB could take part in a debt swap as long as it does not breach Article 123 of the treaty which states that Government’s can’t be financed directly.

So this leaves the door open for the ECB to do a deal through the European Financial Stablity Facility.

Greece has about €350m in debt , or 160pc of Gross Domestic Product.

This has to be reduced to 120pc of GDP by 2020.

Finance Minister Evangelos Venizelos said before he left Greece for Brussels for a meeting with other finance ministers today:"I leave for Brussels with hope that the Eurogroup will take a positive decision concerning the new aid plan."

The three coalition partners in the Greek government of Prime Minister Lucas Papademos earlier held over-night talks on a rescue plan for the troubled economy.

Greece needs to pay back €14bn in debt next month.

According to the Greek press, the agreement will mean over €3bn being taken out of the Greek economy through a number of measures including slashing the minimum wage by 22pc, cuts to salaries and pensions and 15,000 public sector job losses.

New figures out today show that Greek unemployment shot up to over 20pc at the end of the year.

Meanwhile, the head of the group of eurozone finance ministers has ruled out a final deal on the Greek bailout at the Brussels meeting.

Jean-Claude Juncker said ministers had too many "points to clear up" for a deal to be finalised.

"I do not have reasons to believe that there will be a definitive deal this evening," Mr Juncker said. "If it's not tonight, it will be done next week," he said.

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