Athens finalizes more painful measures
Midterm plan to be unveiled in coming days; ECB softens stance on private sector involvement
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.