The finance chief for Europe’s single currency heartland, Jean-Claude Juncker, says global money markets are buying into a 30 billion euros (US$41 billion) backstop bailout for debt-stricken Greece.
“I am reassured by the reactions of markets” since Sunday’s decision by euro peers to offer Athens three years’ breathing space through rescue loans on preferential terms, Luxembourg Prime Minister Juncker said in his offices late on Tuesday.
Juncker said European leaders would have to “wait several days” to reach a “definitive” judgment on how the rescue plan, expected to be underwritten by another 15 billion euros in loans this year from the IMF, had been received “in its entirety.”
He said, however, that a firming of the euro against the US dollar in Asian, European and American markets, and a fall well below 7 percent for the interest rates that debt-stricken Greece must pay to borrow on bond markets, showed that they had taken “the right decision.”
Juncker and his euro finance ministerial partners will tomorrow assess political progress toward how and when to distribute the fall-back loans, should Greece call them in.
Their meeting in Madrid will consider whether a calculated bid to calm fears of Greek default on hundreds of billions of euros of debt is enough to prevent free-fall of the euro against the US dollar, after months stuck in reverse gear. Dismissing analysts’ doubts over the scheme’s readiness and scale, Juncker said he was pleased that a Greek government auction of short-term loan notes on Tuesday had been “oversubscribed at acceptable rates.”
Athens raised 1.56 billion euros from six-month and one-year treasury bills, well above its target, although the government had to offer three times more interest than during a similar auction in January. Athens has to find about 11.5 billion euros by next month, part of about 54 billion euros needed this year to cover debt and budget obligations.
Maintaining that he was unconcerned by variations in rates or additional conditions that could be demanded by the IMF, Juncker said he was “not going to speculate as to an eventual Greek decision to ask for EU funds.”
“I still hope — I am practically convinced — that Greece, given the healthy reception on markets, will not be faced with financing difficulties in the immediate period ahead,” he said.
Greek Prime Minister George Papandreou said on Tuesday that the promise of EU loans provided “a safety net for our country which will allow us to do our work with greater peace of mind.”
He was referring to savage budget cuts and a slew of tax raises aimed at tackling debts last tallied at about 300 billion euros.
If markets adjusted favorably, they did so only lightly — with fears entrenched among traders that fiscal problems in Spain or Portugal may further test eurozone cohesion and political will.
Nevertheless, Juncker insisted he could “not see Spain and Portugal hitting such choppy waters as Greece,” whose problems he admitted were “far from resolved.”
Besides, he was adamant that obstacles to monies physically changing hands — key regional elections in Germany on May 9 and a hamstrung Dutch interim government through until June — need not be seen as significant blocks.
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