Euro Finance Chiefs to Give Positive Greece View, Rehn Says

By Kati Pohjanpalo on October 08, 2012

http://www.businessweek.com/news/2012-10-07/euro-finance-chiefs-to-give-positive-greece-statement-rehn-says

Euro-zone finance ministers meeting today are likely to make a positive statement on Greece’s progress toward meeting austerity targets needed to free the nation’s next bailout payment, European Union Commissioner for Economic and Monetary Affairs Olli Rehn said.

“It’s important that this can be concluded in the coming weeks,” Rehn said in an interview in Helsinki on Oct. 6. “Negotiations have progressed well in the past few days and last night. This is why I assume and expect the euro-group to give a positive and supportive statement on Greece’s progress.”

Negotiations between the government of Prime Minister Antonis Samaras and Greece’s official lenders stalled amid Greek reluctance to sign off on more pension and wage cuts as the nation suffers a fifth year of recession. Greece needs to find spending cuts to maintain access to 240 billion euros ($313 billion) in rescue funds and is trying to reach an agreement with its official lenders to release the next payment of 31 billion euros. The funds would primarily be used to recapitalize Greek banks and boost liquidity in the cash-starved economy.

“It will take some time before the report can be finalized as it takes more work than simply an agreement over the measures Greece commits to balance its budget and carry out structural reforms,” Rehn said.

Deadlines Past

Greek Finance Minister Yannis Stournaras told reporters in Athens this weekend that his government made progress on talks with the European Union and International Monetary Fund on a 13.5 billion-euro package of austerity measures for the next two years. Talks will continue this week, he said on Oct. 6.

The yield on Greece’s benchmark 10-year note eased eight basis points to 18.38 percent as of 9:37 a.m. in London. The difference in yield between Greek 10-year yields and rates on similar-maturity German bunds narrowed to 16.86 percentage points from 16.94 percentage point at the end of last week.

Greece’s statistical service said last week that the economy shrank 7.1 percent last year, more than the 6.9 percent previously thought.

Two bailouts and the biggest debt write-off in history have so far failed to halt Greece’s recessionary slide, prompting Christine Lagarde, the IMF’s managing director, to signal last month that another writedown might need to be considered. German Chancellor Angela Merkel is due to visit Athens tomorrow.

“The deadlines are already past, around the time of the Greek elections and it’s important that this be concluded in the coming weeks,” Rehn said.

To contact the reporter on this story: Kati Pohjanpalo in Helsinki at kpohjanpalo@bloomberg.net

To contact the editor responsible for this story: Tasneem Brogger at tbrogger@bloomberg.net