Greece’s troika of international lenders -the European Union, International Monetary Fund and European Central Bank – on Tuesday said Athens is likely to receive an EUR 8 bln tranche in early November, according to marketwatch.com. The statement comes after officials from the three institutions completed a delayed review of Greece’s efforts to meet terms of last year’s EUR 110 bln rescue. The Greek government proposed additional austerity measures after failing to meet fiscal targets.
The mission has reached staff-level agreement with the authorities on the economic and financial policies needed to bring the government’s economic program back on track. Regarding the outlook, the recession will be deeper than was anticipated in June and a recovery is now expected only from 2013 onwards, WSJ reports. There is no evidence yet of improvement in investor sentiment and the related increase in investments, in part because the reform momentum has not gained the critical mass necessary to begin transforming the investment climate. However, exports are rebounding – albeit from a low base – and a shift towards a more dynamic export sector, supported by a moderation of unit labor costs, should lead to more balanced and sustainable growth over the medium term. Inflation has come down over the last year and is expected to remain below the euro area average in the period ahead. As for 2012, the mission believes that the additional measures announced by the government, in combination with a determined implementation of the adjusted Medium-Term Fiscal Strategy, should be sufficient to bring the fiscal program back on track and ensure that the deficit target of EUR 14.9 bln will be met. Looking to 2013-14, additional measures are likely to be needed to meet program targets. Such measures should be adopted in the context of an update of the Medium-Term Fiscal Strategy by mid-2012. To ensure that the program is growth-friendly, and in view of the ambitious assumptions regarding improvement in revenue administration already embedded in the Medium-Term Fiscal Strategy, it is essential that such measures focus on the expenditure side.
Overall, the head of the eurozone’s finance ministers says the Greek creditors may have to settle for a cut of more than 60 percent in what Athens owes them. Jean-Claude Juncker, who is also prime minister of Luxembourg, says the group is “talking about more” than a 60 percent haircut for Greece, boston.com informs. He says that — unlike financial markets — EU politicians were slow to react to the debt crisis, adding there is no “historical experience” for the present situation.
Trichet sees systemic threat
The euro zone sovereign debt crisis has become systemic and risks to the economy are increasing rapidly with Europe’s banks in the danger zone, European Systemic Risk Board (ESRB) Chairman Jean-Claude Trichet said on Tuesday, Reuters reports, quotes HotNews.ro. Trichet said the euro zone’s European Financial Stability Facility (EFSF) bailout fund should be made as flexible as possible, but without involving the ECB in leveraging it. “Over the past three weeks, the situation has continued to be very demanding. The crisis is systemic and must be tackled decisively,” Trichet told the European Parliament’s Committee on Economic and Monetary Affairs.
Slovak coalition partner says won’t back EFSF vote
Slovakia’s Freedom and Solidarity party said it won’t participate in a Tuesday vote on revamping the EUR 440 bln EFSF (European Financial Stability Facility), likely leaving the ruling coalition short of the votes needed to win approval, marketwatch.com informs. Changes that would allow the EFSF to buy government bonds and provide a backstop for euro-zone banks have been approved by all euro member countries except for Slovakia. Finance Minister Ivan Miklos, who has supported increasing the firepower of the European Financial Stability Facility, took to the floor to present the EFSF accord to the legislature, WSJ reports. “We’re the final 17th country to endorse the EFSF,” Miklos said, adding that the rejection of the fund would risk bringing about a new economic crisis.