European Central Bank President Jean-Claude Trichet, left, chats with Spain’s finance minister Elena Salgado, whose country currently holds the rotating Presidency of EU, ahead of the Ecofin council meeting in Brussels on February 16.
European Union finance ministers, continuing their high-level meeting in Brussels on Tuesday, grudgingly appeared ready to provide additional aid to Greece to avoid a default following the approval of a fresh bailout for Portugal, WSJ informs.
Despite receiving a EUR 110 bln (USD 155 bln) EU-IMF bailout last year, finance experts have said Greece needs more help. Spanish Finance Minister Elena Salgado confirmed that an extension of loan repayments for Greece was “on the cards.” Meanwhile, on Monday, EU finance ministers endorsed Italian central bank chief Mario Draghi as the next president of the European Central Bank (ECB). Sixty-three-year-old Draghi ended up being the only candidate for the presidency, which will become vacant in the autumn when current president, Jean-Claude Trichet, retires.
Germany’s Chancellor Angela Merkel had initially hoped to win over former Bundesbank chief Axel Weber for the top job at the ECB. After Weber declined, Merkel followed French President Nicolas Sarkozy and spoke out in favor of Draghi.
His nomination is expected to be formally agreed at the EU summit at the end of June. Earlier Monday, the European Commission said that a debt restructuring for Greece was not “on the cards,” warning that such a move could have “devastating consequences.” Speaking at a seminar on the sidelines of an EU finance ministers’ meeting, Jean-Claude Juncker, the chairman of the 17-country Eurogroup, said there was a need to move towards what he called a “soft restructuring” of Greek debt, as BBC informs. He said Greece’s first priority had to be to raise EUR 50 bln from the privatisation of state assets and use the money to pay down its debts, which are almost equal to 150 percent of GDP.
In return, Juncker said, some form of restructuring of Athens’ debt might be considered. “If Greece makes all these efforts, then we must see if it is possible to make a soft restructuring of Greek debt. I am strictly opposed to a major restructuring of Greek debt,” he said, the first time the prospect has been acknowledged since the debt crisis began 18 months ago. The euro fell against the dollar and the price of German Bund futures rose slightly after the comments. While Juncker’s pronouncement marks a significant shift in official comment on Greece’s situation, there was disagreement among others about whether such a move was the right thing to do or was even possible. German Finance Minister Wolfgang Schäuble said Sunday that Greece could be granted an extension to its repayment schedule for its massive debt, but only if private creditors were also involved. Dutch Finance Minister Jan Kees de Jager criticized Athens for not being on the “right track” and suggested that rather than a debt restructuring, “the only way forward [was] more reforms, more budget cuts and privatization.”
European Economic Affairs Commissioner Olli Rehn told the German daily Die Welt that Greece “must accelerate its economic reforms and set up a complete privatization program,” adding that a default would be a disaster for Greece and the entire eurozone. Giving Athens more funds – Greek government officials have floated the figure of an extra EUR 60 bln – is likely to prove a hard sell for EU governments facing voters increasingly hostile to bailouts at the taxpayer’s expense.
Portugal gets a bailout deal
On Monday, EU finance ministers waved through an emergency loan package for Portugal totaling some EUR 78 bln over three years. The decision is the third bailout granted to a eurozone country in the past year, following Greece and Ireland. The EU said in a statement that Portugal would “encourage investors to maintain their overall exposures on a voluntary basis.” Lisbon is also expected to embark on an ambitious privatization program to reduce public debt. Both the request to private investors and the privatization measures were conditions set by Finland for their support of the bailout, which must be approved unanimously by all 17 eurozone members.