Euro­pean Union to de­cide Greek loan ex­ten­sion in early 2011

The Pak Banker - - Company& -

ATHENS: The Euro­pean Union will likely de­cide early next year on ex­tend­ing Greece's re­pay­ment pe­riod for the bailout loans that saved it from de­fault, top EU eco­nomic of­fi­cial Olli Rehn said Thurs­day.

Greece has to start re­pay­ing loans of up to euro110 bil­lion ($145 bil­lion) from the EU and In­ter­na­tional Mon­e­tary Fund in 2013. EU gov­ern­ments have said they are con­sid­er­ing push­ing back that date by 4 1/2 years to put it in line with the dead­lines of Ire­land's own bailout.

The move comes as EU of­fi­cials make ef­forts to ease the pres­sure in debt mar­kets that forced Ire­land's res­cue last week and threat­ened to en­gulf Por­tu­gal as well as larger economies like Spain and Italy. While the EU has re­sisted any big moves, such as boost­ing its bailout fund or cre­at­ing Euro­pean bonds to share the debt bur­den, it has fo­cused on aus­ter­ity plans and mak­ing bailout re­pay­ment terms more flex­i­ble.

In Greece's case, the fear is that its econ­omy will not be grow­ing suf­fi­ciently by 2013 to gen­er­ate enough rev­enue to pay back its debts.

Rehn said the Euro­pean Com­mis­sion was ex­am­in­ing the date ex­ten­sion "fol­low­ing the de­ci­sion to do so by the EU fi­nance min­is­ters."

"We stand ready to make the con­crete pro­posal early next year, and I'm cer­tain that it will re­ceive the sup­port of EU fi­nance min­is­ters," the com­mis­sioner told re­porters af­ter meet­ing with Greek Fi­nance Min­is­ter Ge­orge Pa­pa­con­stanti­nou.

Speak­ing at a con­fer­ence out­side Athens ear­lier in the day, Rehn said that the ex­ten­sion "will mean that we will be able to go be­yond and sta­bi­lize (Greece's) debt dy­nam­ics and over­come the hump in debt re­pay­ment, es­pe­cially in 2014 and 2015." "This will cer­tainly re­in­force sta­bil­ity and con­fi­dence in the Greek eco­nomic re­form pro­gram," he said.

Rehn expressed "sin­cere ad­mi­ra­tion" at the progress of Greek fi­nan­cial re­forms, which have in­cluded over­haul­ing the pen­sion sys­tem, cut­ting civil ser­vice salaries, trim­ming pen­sions and in­creas­ing con­sumer taxes.

Greece must lower its bud­get deficit from the 15.4 per­cent of gross do­mes­tic prod­uct it stood at in 2009, to be­low the eu­ro­zone limit of 3 per­cent of GDP by 2014. Its fi­nances are un­der strict su­per­vi­sion by the IMF and EU, and the quar­terly dis­burse­ment of funds from the bailout loans de­pends on Athens meet­ing fi­nan­cial tar­gets. "By suc­ceed­ing in its pro­gram, Greece is re­gain­ing the con­fi­dence of its part­ners in Europe and be­yond," Rehn said af­ter his meet­ing with Pa­pa­con­stanti­nou. "One sign of this is that the coun­cil of EU fi­nance min­is­ters is ready to look pos­i­tively into the ex­ten­sion of the re­pay­ment pe­riod of the loan for Greece. I am cer­tain this will dis­pel any doubts over Greece be­ing able to re­pay its loan." On Tues­day, IMF man­ag­ing di­rec­tor Do­minique Strauss-Kahn said on a visit to Athens that he sup­ported the ex­ten­sion with­out im­pos­ing ad­di­tional de­mands for eco­nomic aus­ter­ity. -PB News

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