‘Vi­tal step back’ from de­fault

Bar­roso and Van Rom­puy say sec­ond pos­i­tive vote will pave the way for next tranche; Greek bonds jump

Kathimerini English - - Business -

The Greek Par­lia­ment’s ap­proval of a 28bil­lion-euro aus­ter­ity pack­age yes­ter­day is a “vi­tal step back” from a debt de­fault, Euro­pean Com­mis­sion Pres­i­dent Jose Manuel Bar­roso and Euro­pean Coun­cil Pres­i­dent Her­man Van Rom­puy said in a joint state­ment.

The EU had threat­ened to block a 12-bil­lion-euro pay­out from Greece’s 110-bil­lioneuro bailout un­less the lawmakers agreed to more spend­ing cuts and tax hikes.

The fo­cus now shifts to a sec­ond vote to­day to put the mea­sures in mo­tion and to a meet­ing Sun­day of eu­ro­zone fi­nance min­is­ters to plan a sec­ond bailout for Greece.

“To­mor­row, the eyes of Europe will again be turned to­wards Athens,” the lead­ers said. “A sec­ond pos­i­tive vote would pave the way for the dis­burse­ment of the next tranche of fi­nan­cial as­sis­tance.”

In a sep­a­rate state­ment, Jean-Claude Juncker, pres­i­dent of the Eurogroup of fi­nance min­is­ters, said he was “re­lieved” by the vote and ap­pealed to Greek po­lit­i­cal forces to work to­gether. “It’s a time for col­lec­tive re­spon­si­bil­ity and na­tional unity. It is only in com­bin­ing all their ef­forts and all their tal­ent that the Greeks will over­come this cri­sis.”

In re­sponse to the gov­ern­ment pass­ing the first part of the aus­ter­ity plan, Greek bonds jumped, lead­ing gains in the se­cu­ri­ties of the euro re­gion’s most in­debted na­tions.

Greek two-year note yields sank 123 ba­sis points to 27.32 per­cent. The 4.6 per­cent se­cu­rity due May 2013 soared 1.32, or 13.20 eu­ros per 1,000-euro face amount, to 69.63. The 10year yield slid 17 ba­sis points to 16.29 per­cent, driv­ing the dif­fer­ence in yield with 10year bunds 22 ba­sis points lower to 1,330 ba­sis points, or 13.30 per­cent­age points.

“The defin­ing mo­ment will be when the Euro­pean Union an­nounces both the size of the Greek as­sis­tance pack­age and the terms and con­di­tions,” Mark Grant, man­ag­ing di­rec­tor at South­west Se­cu­ri­ties Inc in Fort Laud­erdale, Florida, told Bloomberg.

“The rat­ings agen­cies, if they are to be be­lieved, will view the ‘rollover’ as a de­fault and then, if that hap­pens, all hell will break loose.”

Greece’s 10-year yield has jumped more than 3.5 per­cent­age points this quar­ter as euro-re­gion pol­i­cy­mak­ers strug­gled to con­tain the debt cri­sis.

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