Leaders optimistic a Greek bailout deal will be reached

BRUSSELS, Belgium — Greece’s hopes to finally get its bailout and dodge default next month were boosted Friday, when key European leaders, including German Chancellor Angela Merkel, sounded confident a deal could be agreed.

BRUSSELS, Belgium — Greece’s hopes to finally get its bailout and dodge default next month were boosted Friday, when key European leaders, including German Chancellor Angela Merkel, sounded confident a deal could be agreed.

The leaders of Germany, Italy and Greece are “optimistic” the C130 billion ($170 billion) rescue package can be cleared next week, a spokesman for Merkel said Friday after the three held a conference call. Hours earlier, the French prime minister warned against letting Greece default.

That means the euro currency union’s main powers are now pushing toward resolving the uncertainty hanging over Greece at a meeting of eurozone finance ministers on Monday.

Agreement on the bailout, which comes on top of a C110 billion ($145 billion) rescue granted in 2010, has been delayed for months due to doubts over Greek political leaders’ commitment to tough new austerity measures as well as the worsening economic situation in the country that kicked off Europe’s debt crisis two years ago.

Some eurozone governments’ caution over handing out more money to Athens had investors wondering whether Greece would be forced to default and leave the euro instead. After days of confusion, Germany — the main bankroller for the bailouts — made it clear it wanted to see Greece’s deal through.

“The three leaders are optimistic that the finance ministers can find a solution to the pending questions at the Eurogroup on Monday and thereby contribute to the stabilization of Greece,” Steffen Seibert said in a statement, after Merkel, Italian Prime Minister Mario Monti and Greece’s Premier Lucas Papademos held a conference call earlier Friday.

Papademos later also called Dutch Prime Minister Mark Rutte, whose country is one of the biggest bailout skeptics.

Greece is under big pressure to get the green light on the bailout so it can move ahead with a related C100 billion ($130 billion) debt-relief deal with private bondholders that till take several weeks to implement. That deal has to be completed before March 20, when Athens faces a C14.5 billion bond redemption it cannot afford.

Tensions between Greece and the rest of the eurozone hit new highs this week as politicians in Athens and other European capitals blamed each other for the problems related to the bailout. Seven people were detained Friday following an anti-austerity protest in which eggs were thrown at the German embassy in central Athens.

But French Prime Minister Francois Fillon warned that the fallout of letting the country go up in financial flames would be far-reaching.

“We must do absolutely everything so that there is not a default by Greece, which would be dramatic for Greeks themselves and dramatic for Europeans,” he said on RTL radio Friday.

Now that the Greek Parliament has approved austerity measures demanded by international creditors and banks have agreed to help in the bailout, “the Europeans must now honour their commitments. That is the position that France is defending,” Fillon said.

Some European politicians have downplayed the effects of a default by Greece, but Fillon called that “totally irresponsible.”

The last issues to resolve before a bailout is rubber-stamped include making sure the aid program brings Greece’s debt down to a sustainable level and setting tighter controls on Athens’ spending decisions.

Germany and several other countries want Greece to set up a form of escrow account — separate from the main government budget — that would give priority to servicing Greece’s debt over spending on government services.

The European Commission, the EU’s executive, is working on several options for such an escrow account. An EU official said that, among several options, the Commission is looking at a “transit account” through which Greece’s bailout money would be funneled.

The account would have a “hierarchy of payments,” with servicing the country’s debt at the very top, the official said. He was speaking on condition of anonymity because the details of the plan are still in flux.

The official said there was “a critical mass” of euro countries in favour of such an account. He also said Greece was not in a position to challenge the plan. “It’s part of it (the bailout deal) as long as some delegations want it to be,” he added.

The eurozone also still needs to decide on additional measures to bring Greece’s debt down to 120 per cent of economic output by 2020 — the target leaders defined when they tentatively agreed on more aid in October.

The current plan, which includes the C130 billion bailout, the C100 billion debt relief and the new austerity measures, would leave Athens debt close to 129 per cent of economic output at the end of the decade. The International Monetary Fund and the eurozone believe such a high debt load would be unsustainable without outside assistance.

Meanwhile, Athens took the first concrete steps toward making sure that a small number of holdouts cannot scupper the debt relief deal it has negotiated with private investors.

The Greek parliament is expected to soon introduce so-called collective action clauses in its outstanding bond contracts. The CACs would force holdouts to participate in the planned bond swap as long as a majority of investors approve.

As a prelude to the debt swap, the European Central Bank has started exchanging its holdings of Greek government bonds for newly issued bonds of the same value, according to a eurozone official with knowledge of the matter. Those new bonds would not be retrofitted with CACs, protecting the ECB from being forced into the swap deal.

The ECB bought around C55 billion ($72 billion) worth of Greek debt in 2010 as investors dumped the country’s bonds and interest rates soared. But because bond prices were already low at the time, analysts estimate the ECB spent only around C40 billion on its holdings.

The exchange, expected to be completed by Monday, does not address the issue of whether the ECB would forego the profits on its Greek bond purchases to help close the financing gap in the new bailout program.

Bank officials have said they could simply return any investment profits to national governments, which could then do what they wanted with the money.

———

Charlton reported from Paris. David McHugh in Frankfurt, Germany; Geir Moulson in Berlin; Michael Corder in The Hague, Netherlands; and Derek Gatopoulos in Athens, Greece, contributed to this report.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Dr. Deena Hinshaw, Alberta’s chief medical officer of health, reported 323 new COVID-19 cases Tuesday. (File photo by THE CANADIAN PRESS/Jason Franson)
‘We’re in a danger zone,’ says Hinshaw

The province’s top doctor says “we’re in a danger zone” when it… Continue reading

Mayor Tara Veer pleads with the premier Tuesday to review the decision to move to a consolidated EMS dispatch system, which will be moved to three centres across the province. (Photo by BYRON HACKETT/Advocate Staff)
‘Issue of life and death’: mayors plead with government to halt consolidated EMS dispatch

Red Deer Mayor Tara Veer calls on premier to overturn consolidated EMS dispatch decision

A $2.3-billion expansion of Alberta’s natural gas transportation system has been approved. “This should provide significant benefits — and we need every little bit of economic boost we can get,” says Reg Warkentin, policy adviser for the Red Deer & District Chamber of Commerce. (Flickr photo)
Red Deer-area to benefit from $2.3 billion gas pipeline expansion project

Project will add 344 km of new pipeline between RMH and Grande Prairie

Dustin Snider was elected the new board president for Red Deer & District Chamber of Commerce. (Photo by SUSAN ZIELINSKI/Advocate staff)
Earl’s Restaurant manager re-elected Red Deer & District Chamber of Commerce president

Dustin Snider has been re-elected president of the Red Deer & Distict… Continue reading

Red Deer singer Kayla Williams hopes listeners fed up with the pandemic are comforted by her new song, Stealing from My Youth, which is digitally available for streaming on Friday. (Contributed photo).
Red Deer singer summarizes universal pandemic feelings in a new single

Kayla Williams releases ‘Stealing From My Youth’ on Friday

Los Angeles Dodgers starting pitcher Clayton Kershaw warms up before Game 1 of the baseball World Series against the Tampa Bay Rays Tuesday, Oct. 20, 2020, in Arlington, Texas. (AP Photo/Eric Gay)
Kershaw, LA stars shine, Dodgers top Rays 8-3 in WS opener

Kershaw, LA stars shine, Dodgers top Rays 8-3 in WS opener

Manchester United's Marcus Rashford leaps over a challenge by PSG's Presnel Kimpembe during the Champions League group H soccer match between Paris Saint-Germain and Manchester United at the Parc des Princes in Paris, France, Tuesday, Oct. 20, 2020. (AP Photo/Michel Euler)
Man United wins again at PSG; Messi scores in Barca rout

Man United wins again at PSG; Messi scores in Barca rout

Hamilton Forge coach Bobby Smyrniotis, right, hugs captain Kyle Bekker following their victory in the Canadian Premier League soccer final against the Calgary Cavalry in Calgary, Saturday, Nov. 2, 2019. Under Smyrniotis, Forge FC has been the class of the Canadian Premier League. The two-time champions from Hamilton look to mark their internationally this week as they open CONCACAF League play in El Salvador. THE CANADIAN PRESS/Jeff McIntosh
Forge FC coach Bobby Smyrniotis’ influence on Canadian soccer continues to grow

Forge FC coach Bobby Smyrniotis’ influence on Canadian soccer continues to grow

Players' sticks are shown during a World Hockey Championships game in Moscow, Russia on Thursday, May 12, 2016. A senior hockey team in a small city in southern Manitoba has changed its name following a push against the use of Indigenous names and caricatures as mascots. THE CANADIAN PRESS/AP, Ivan Sekretarev
Manitoba senior hockey team changes Indigenous name to Bombers

Manitoba senior hockey team changes Indigenous name to Bombers

Jason Kokrak tees off during the final round of the CJ Cup golf tournament at Shadow Creek Golf Course Sunday, Oct. 18, 2020, in North Las Vegas. (AP Photo/David Becker)
Long drive champ Berkshire looking to compete in tournaments

Long drive champ Berkshire looking to compete in tournaments

The Los Angeles Dodgers line up during during the national anthem and a fly over before Game 1 of the baseball World Series against the Tampa Bay Rays Tuesday, Oct. 20, 2020, in Arlington, Texas. (AP Photo/Eric Gay)
Pandemic World Series draws smallest crowd in over century

Pandemic World Series draws smallest crowd in over century

Keegan Messing performs in the Gala at the 2020 Canadian Tire National Skating Championships in Mississauga, Ont., on Sunday, Jan. 19, 2020. THE CANADIAN PRESS/Frank Gunn
Messing dedicating his Skate America performance to grounded Canadian teammates

Messing dedicating his Skate America performance to grounded Canadian teammates

Most Read