Stocks rise on Greece rescue hope

Brussels – A ray of hope returned to Greece’s financial marathon yesterday when Athens reached agreement with creditors on filling a 325 million (NZ$510M) gap in its budget.

The German-led Aaa-rated states added to the cautious optimism by dropping proposals for long delays in triggering the new 230 billion (NZ$361B) rescue.

Markets recovered to close slightly higher after it had appeared earlier that the northern eurogroup states intended to withhold rescue funds to ensure the obedience of the Greek government that will be elected in April.

German and Dutch finance ministers even raised the prospect of seeking a delay in the elections

The eurozone’s political bosses will thrash out new measures to monitor Greek compliance, with the hope of endorsing the bailout package on Monday.

Further doubts arose, though, after an analysis showed the package would not bring Greek national debt down to the projected 120 per cent of GDP by 2020, and that it would remain as high as 129 per cent.

Dutch Finance Minister Jan Kees de Jager said he could not ‘‘lend money to a country without such a debt sustainability analysis’’. Greek debt is at present rising beyond 160 per cent of GDP.

Conservative New Democracy party leader Antonis Samaras, the favourite to win the Greek elections, said he was confident the eurogroup would give its blessing to the entire package in Brussels on Monday. ‘‘There is no certainty, but there is cautious optimism,’’ he said. ‘‘Greece has done what it had to do.’’

Time is running short because national parliaments must vote on the bailout and the bond swap, and it will take weeks to raise the funds and engineer the 50 per cent bond ‘‘haircut’’ with banks and other private creditors.

The distrustful AAA states – Germany, the Netherlands, Luxembourg and Finland – want permanent supervision of Greece’s performance in carrying out its pledges to cut the public sector, reduce private sector wages, deregulate the labour market and privatise state assets.

The 325 million budget gap will be filled with 100 million of defence cuts, 90 million of public sector wage reductions and a further 135 million from the health, labour and interior ministries, Greek sources said.

The demands for ever-more intrusive surveillance are infuriating Athens. Public Order Minister Christos Papoutsis said the EU was waging ‘‘blackmail’’.

‘‘Any other intervention, any new demands by our lenders, will mean they are mocking the country,’’ he said.

Union leaders called for a rally tomorrow ‘‘to answer all those who want Greece under German occupation’’.

Luxembourg Finance Minister Luc Frieden said that Greece had to decide whether it wanted to remain in the eurozone.