Markets relieved after successful dialogue
The successful end to the monthlong negotiations between Greece and representatives from the European Commission, European Central Bank and the International Monetary Fund on the country’s economic progress saw the markets breathe a sigh of relief yesterday.
An afternoon statement by the Finance Ministry that the talks had reached a satisfactory conclusion triggered a positive market response, although the prevailing view is that the 110-billion-euro package will not be enough to cover Greece’s needs.
The euro pushed up to a day high of $1.4585 after the statement was released, while Greece’s borrowing costs eased during the day in anticipation of the news, with yields on 10year Greek bonds dropping some 60 basis points to 16.2 percent. Stocks also saw a rise late in the day.
Effectively locked out of raising money through the sale of its bonds because of prohibitively high inter- est rates, Greece will need another bailout, which reports put at up to 65 billion euros.
The ministry said in a statement that the talks concerned how well Greece is sticking to conditions set out in the original bailout package, its midterm plan, further fiscal measures needed to meet 2011 goals, the privatization program and structural reforms needed to help secure growth and boost competitiveness.
The Greek government is seeking to narrow its deficit to 7.5 percent of gross domestic product by the end of this year, from the 10.5 percent it stood at in 2010. To achieve that, Finance Minister Giorgos Papaconstantinou last month announced additional austerity measures worth about 6.4 billion euros for this year.
The texts detailing the measures are to be finalized “in the coming days” and will be submitted to Parliament after being approved by the Cabinet, the ministry added.