Greece says it is “one step away” from completing an agreement with its private creditors to cut $130 billion of its debt.
Greek Finance Minister Evangelos Venizelos gave the optimistic assessment of the country’s negotiations with major financial institutions as he and Prime Minister Lucas Papademos started another round of talks late Friday. Greece is looking to conclude the debt agreement and eventually win approval of its second international bailout in two years. That would be a $169 billion aid package the Athens government says it needs to avoid defaulting on its financial obligations in March.
The country’s prospective pact with 32 large financial institutions would cut in half the amount Greece owes them, but an agreement on key details of the deal has proven elusive.
European leaders are continuing to press Greece to impose more unpopular austerity measures. They say the debt-ridden country will not get the new bailout if it does not reach agreement with the lenders and cut its own spending.
Irish Prime Minister Enda Kenny told global business leaders meeting at the Swiss ski resort of Davos that Europe has itself to blame for the continent’s two-year governmental debt crisis. Ireland is another country that was forced to secure an international bailout.
Mr. Kenny said his countrymen share in the blame for Ireland’s financial plight.
Even as Greece worked toward an agreement with its creditors, there were new pressures on five other countries in the 17-nation bloc that uses the common euro currency. U.S. ratings agency Fitch said Friday it is downgrading the credit standing of Italy and Spain, which have the eurozone’s third and fourth largest economies, as well as Belgium, Cyprus and Slovenia. Last week, another company, Standard & Poor’s, downgraded nine countries, including France.
Greece’s negotiations with its private creditors are centering on what interest rate the large financial institutions are willing to accept on the revised Greek bonds they hold. The lenders are pressing for a 4-percent rate, but European leaders are demanding 3.5 percent, to ease Greece’s borrowing costs.
European Union economic chief OIli Rehn said Thursday that Greece’s public creditors may have to deliver more financial aid to cut its staggering debt because the prospective deal with private lenders is not likely to be big enough.
His suggestion that the 17-nation bloc that uses the common euro currency and the European Central Bank may have to add money to the Greek debt relief effort is an idea that numerous European leaders oppose.
The continent’s leaders are pressing Greece to reach a new debt deal with its private creditors that by 2020 would cut the country’s financial obligations to 120 percent of the country’s annual economic output. But the prospective debt relief package with the private lenders would not reach that mark, and perhaps leave a funding shortfall of as much as $19 billion.
