Athens fi­nal­izes more painful mea­sures

Midterm plan to be un­veiled in com­ing days; ECB soft­ens stance on pri­vate sec­tor in­volve­ment

Kathimerini English - - Business & Finance -

As Greece agreed with its Euro­pean Union and In­ter­na­tional Mon­e­tary Fund cred­i­tors to im­pose yet deeper aus­ter­ity, the Euro­pean Cen­tral Bank in­di­cated yes­ter­day that pri­vate in­vestors may be in­volved in sup­port­ing a new aid plans for Athens.

The Greek gov­ern­ment is be­lieved to have signed up to 6.4 bil­lion eu­ros in new mea­sures to cut its 2011 bud­get deficit and aims to wrap up bailout talks with in­ter­na­tional in­spec­tors to­day.

Prime Min­is­ter Ge­orge Pa­pan­dreou will present the main points of the gov­ern­ment’s midterm bud­get plan when he meets Jean-Claude Juncker, the chair­man of the group of eu­ro­zone fi­nance min­is­ters, in Lux­em­bourg to­day.

The so-called troika team from the EU, IMF and ECB has been in Athens since early May ne­go­ti­at­ing two main points: whether the gov­ern­ment has qual­i­fied for a fifth tranche of fund­ing un­der an ex­ist­ing 110-bil­lion-euro res­cue deal, and the sus­tain­abil­ity of Greece’s 340-bil­lion-euro debt.

De­tails on the midterm bud­get plan, which in­cludes tax in­creases and lower in­come tax ex­emp­tions, are ex­pected to be made pub­lic in the com­ing days.

As the ink dries on the 2012-15 agenda, ECB Vice Pres­i­dent Vi­tor Con­stan­cio yes­ter­day did not rule out pri­vate sec­tor in­volve­ment in a new deal to aid Greece but firmly op­poses any out­right debt re­struc­tur­ing.

EU and ECB pol­i­cy­mak­ers have dif­fered over the shape of a sec­ond res­cue for Greece cur­rently be­ing worked on across Europe, with the eu­ro­zone’s cen­tral bank ar­gu­ing firmly against any re­struc­tur­ing.

ECB hawk Juer­gen Stark of­fered a glim­mer of com­pro­mise on Wed­nes­day, say­ing a vol­un­tary deal for in­vestors to keep re­new­ing their Greek debt hold­ings might be ac­cept­able as part of a broader pack­age.

“We have never re­fused ev­ery form of pri­vate sec­tor in­volve­ment in Greece,” Con­stan­cio told re­porters when asked about the im­pact on in­vestors who have loaned money to Greece.

“Some forms of pri­vate sec­tor in­volve­ment which are vol­un­tary – there are many forms – and some forms we have al­ways ad­mit­ted as pos­si­bil­i­ties,” he added, speak­ing on the side­lines of an event in Aachen, Ger­many.

He de­clined to give ex­am­ples but said the bank’s con­cerns had al­ways been about avoid­ing a tech­ni­cal de­fault on Greece’s debt – some­thing EU of­fi­cials have been try­ing to find a way around in talks with Athens.

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