G8 Summit ended with pledge to support growth and Greece

The four day G8 Summit closed out at Camp Davis on Saturday with world leaders coming down in support of growth and saving Greece from the current financial crisis. At the same time, the leaders of the world put the onus on their European counterparts to deal with the financial turmoil before it starts hurting the rest of the world economy.

British PM David Cameron called for “decisive action” and “contingency plan” to combat and tackle the eurozone crisis. He also delicately prodded that the European Central Bank (ECB) should consider printing notes to revive demand in the single currency block.

US President Barack Obama, the host of the Camp Davis Summit, called upon the leaders of France, Germany and Italy to resolve the crisis through restoring public finances and encouraging stimulus. Keeping an eye on his re-election chances, President Obama proposed “stimulus” for job-creating infrastructures, and balancing it with “reforms” in order to address debts and deficits.

Lastly, in order to address the political and economic upheaval in Greece, the leaders of the G8 nations also reaffirmed their interest in keeping Greece within the euro zone. Though, they didn’t propose any solution to tackle the turmoil in Greece.

IMF Chief Lagarde cautions against Greek exit fallout

Following Greek President Carolos Papoulias's decision to nominate a judge as the head of the interim government, the chief of International Monetary Fund (IMF) until the upcoming election, Christine Lagarde, called on prominent Greek leaders to show their commitment to stay with the euro zone on Wednesday. She stressed on the importance of sticking to the bailout agreement – not just for Greece’s own financial and political security but also for the entire euro zone. She also pointed out the possible consequences of such exit – which would be “hard and expensive, and not just for Greece”. Greece is set for a repeat general election on June 17.

What is adding to the fear and speculation in Europe is the rising popularity of political parties in Greece who are against European Union-IMF bailout deal. In the event that an anti-bailout party comes to power following the election, there is a chance that the bail-out deal might come apart and Greece would exit from euro zone.  There is also a fear of its cascading effect on other bigger but vulnerable economies in Europe, especially Spain and Italy.

Top EU officials have already warned Greece that complying with the terms of the bailout package is mandatory in order to receive international monetary aid.

Greece seeks re-election as coalition talks turn unproductive

The latest coalition talk in Athens ended without success as President Carolos Papoulias failed to persuade front-line political leaders to back technocrat government. The idea of technocrat government was proposed by the President himself after mainstream political parties in Greece failed to come up with a unity government. For Greece, this means it has to brace for repeat general election, which is going to further drain its economy, or face bankruptcy.

The Evangelos Venizelos-led Socialist Pasok party blamed the negative outcome of the meeting on arrogant, petty party politics and opportunism. On the other hand, the leader of the Syriza party, Alexis Tsipras, emboldened by his party’s success in the latest general election, stated on a high note that he resisted any move to support the pro-bailout deal in every possible way he could.

Earlier, eurozone leaders, gathered for financial ministers’ meeting in Brussels, have rubbished Greece’s exit from euro as propaganda. However, they have acknowledged preparing contingency plans. The EU leaders have clearly stressed that unless Athens fully agrees with the bailout reform plan, they are not going to receive International monetary aid.

President Papoulias puts forward technocrat government for Greece

In a desperate bid to end the week-long political impasse and make sure that Greece does not lose out on International bailout package, President Carolos Papoulias has suggested the formation of a government of technocrats on Monday. The idea was floated before the leaders of Greece’s three main political parties – the Socialist Pasok, the radical left Syriza and the Conservative New Democracy party, as they failed to form a unity government.

The proposal, though, brought forth a lukewarm response across front-line political leaders, a meeting has been scheduled for Tuesday afternoon (2 PM local time) to chew on it.

While the New Democracy leader Antonis Samaras gave his assurance to help build a government, the chief of Democratic left, Fotis Kouvelis, is totally against the idea of a technocrat government. The chief of Pasok party, Evangelos Venizelos, has termed the Tuesday’s meeting as the last attempt to save Greece “out of a dead end.” On the other hand, although  Syriza party chief Alexis Tsipras is set to attend Tuesday’s meeting, his party has made it abundantly clear that they would not support any move to back austerity. Buzz is that, the 37-year-old dashing Syriza leader wants Greece to either pull out of the bailout agreement altogether or renegotiate the deal.

Hopes dashed as Greece failed to form unity government

Despite President Carolos Papoulias’ repeated attempts to save Greece from further chaos, the front-line party heads have failed to form coalition government. This has happened as a result of the failure of the political parties to reach a consensus on the controversial Greece bail-out deal.

The meeting held at the Presidential mansion on Sunday was attended by three of the most prominent Greek leaders. They were the conservative leader Antonis Samaras, the extreme leftist Syriza chief Alexis Tsipras and the socialist Pasok leader Evangelos Venizelos.

The talk which was aimed at ironing out differences between major political parties on fiscal pact, soon reached an impasse as leaders started blaming each other on the highly controversial bailout agreement and stiff spending cuts. While, the 37-year old Alexis Tsipras riding high on ‘anti-austerity wave’ clearly and completely rejected any negotiations with pro-bailout leaders, Conservative leader Antonis Samaras accused Tsipras for the current standoff. It has also been reported that Tsipras has given the assurance of pulling out of the bail-out deal without giving up Euro.

As per the latest news, the President of Greece is expected to hold another round of fresh talks with the political parties on Monday. Though only a slim chance remains, but if Greece succeeds to form a new government before the Thursday deadline, it might be able to avoid a repeat election and, perhaps, stay in the euro zone.

Greece fiscal crisis deepens amidst growing political chaos

Greece crisis has, perhaps, reached its highest peak as Alexis Tsipras, the newly elected head of the Syriza party (radical left), picked ‘growth’ over ‘austerity’ and ruled out coalition with the two main parties that suffered heavy defeat on Sunday’s election for adopting tight fiscal control. These two are the Socialists party and the conservative New Democracy party. This has prompted EU to mount pressure on Greece – either follow the bail-out terms or face expulsion from the exclusive circle of Eurozone. As the possibility of total economic collapse is intensifying in Greece, there is a growing fear that this would have a snow-balling effect on other debt-hit economies in the Eurozone, further endangering the ‘Euro.'

On Tuesday, the newly elected Syriza party leader, Alexis Tsipras, has asked for temporary stopping on the repayment of Greece debt. He has also expressed his desire to do away with austerity measures that are drawing criticism for the country’s economic collapse.

Germany is the biggest contributor of financial aid to Athens and has ruled out any scope for renegotiation. Germany has stated that for aid to flow, conditions of the bail out have to be met by Athens. As of now, a bill proposing a new spending cut is expected to go before the parliament next month. In exchange, Greece would receive international aid amounting to €11.5 billion in installment; otherwise, it faces default on its staggering €200 billion total debt.

Proposed Greek bond swap finally gets creditors approval

Finally, the Greek debt restructuring program cleared its last hurdle on Friday after private bond holders agreed to exchange their existing old bonds for new securities. This clears the way for Greece to receive €130 billion in bail-out package from the International Monetary Fund (IMF) and European Union (EU).

The proposed new deal has found favor with 85% of the private holders of Greek bonds whose net worth is € 172 billion in bond amount. The rest 15 percent (equivalent to €25 billion) would be swept up through collective-action clauses. Together, these would add up to € 197 billion out of the total € 206 billion. The latest bond-swap deal expects its private bond holders to accept financial loss that could go as high as 75 percent.

The Greek debt restructuring program is supposed to bring some measure of relief for the participating investors. It is reported that about 15 percent of their holdings would be in good, short-term bonds and 31.5% in upcoming Greek bonds with 11 to 30 years of maturity period. In addition, they would also receive Greece GDP-growth linked security. This doesn’t look much encouraging considering Greece’s current financial woes.

For Greece, besides bringing down the public debt amount, the new bond swap would also reduce its yearly interest burden, starting this year. Last year, the interest itself was as high as €16.4 billion.

Greece set to get $172 Billion in second bailout

After more than 12-hour long meeting that stretched till Tuesday early hours, Eurogroup Finance ministers are all set to declare a whopping €130 billon (equivalent to 170 billion dollars) towards Greece’s second bailout. It is believed that the bailout amount would help Greece in avoiding short-term default and also bringing down its debt to sustainable 120.5 percent of GDP (gross domestic product) by 2020.

Though the final details of the deal is yet to be released, it has been reported that the private investors of Greek government bonds have finally accepted loss exceeding 50 percent (on face value). It is estimated that the loss on bond face value could go up to 53 percent, bringing total loss to up to 75 percent for private investors.

Currently the economy of Greece is into its five long years of recession. Its sovereign debt is at 160% of GDP. Since approving the latest austerity pact by the parliament, the country has seen some of the worst protests in recent months. While doubts still remain about how stringent rate cuts would address the long term issue of debt crisis, Eurozone leaders would be relieved that the money would help Greece in staving off immediate crisis.

Pressure mounts on EU to seal Greek bailout deal

Following last week’s bumpy starts over second bailout to Greece, Eurozone finance ministers are pressing ahead to give their final approval to the € 230 billion emergency fund. Time is of crucial factor as Greece has to make € 14.5 billion bond repayment before March 20th or face default. The final meeting that would decide the fate of Greece is scheduled to start at the EU headquarter 1430 GMT onwards on Monday.

Such is the desperation that Premier Lucas Papademos of Greece has already reached Brussels to hold talks with other European leaders. It is believed that the presence of the Greek Prime Minister would lend more weightage to the loan talk. Earlier, Germany had expressed its reluctance on the latest bail-out package to Greece.

The latest deal expects private sector government bond holders to swap their existing old bonds with new bonds. This would bring down the current bond value to about 30 percent. To make it compulsory, the government of Greece is set to pass a new bill this week which would force the bond holders to accept the rate cuts on bonds if they don’t agree volutarily to the new agreement. Besides, a string of other austerity cuts and reforms are waiting to be announced in Greece before the end of this month to appease the concern of its International financial backers.

Greece austerity deal reaches an impasse over pension cuts

As leaders in Greece are trying to work around the new austerity proposal, one last hurdle has come in the way of its success early Thursday. What is at issue is the proposed cut in supplementary pensions, which has put a temporary halt on the ongoing negotiations between Greece Premier Lucas Papademos government and its foreign creditors.

After the 7-hour long meeting, it is officially confirmed that an agreement has been reached on all issues including the controversial 22% reduction in minimum wages, saving the one that proposes pension cuts. However, leaders are hopeful that they would still hammer out a compromise before the Eurogroup Finance ministers’ meeting in Brussels on Thursday.

The 50-page loan agreement proposed by its overseas financial backers is due to receive formal seal from the Greece cabinet sometime today, failing which Greece could be in a messy default without €130 bn bail-out fund. On the other hand, with elections in Greece expected as early as in May, political parties are in a dilemma whether or not to back the proposed pension cut as it is going to affect low-income groups and elderly.

With austerity talk coming to a halt in Greece, the attention is shifted on the Eurozone meeting in Brussels and its outcome.

Austerity talk postpones as Greece goes on strike

In a major development, the union members in Greece has threatened to go on a nation-wide, day-long strike on Tuesday. This includes members of civil servants as well as private-sector workers who are already frustrated by two years of austerity and are against more stringent reforms that will dent a bigger hole in their earnings. The strike has delayed Greek government’s attempt to reach a final decision on revised austerity plan to Wednesday. Incidentally, this is the second time that the government of Greece has failed to meet the deadline.

As Greece prepares for a long haul, its leaders are striving hard to strike a balance between reform demands (by its private eurozone creditors) and the need to retain public support, especially with the elections coming later in 2012. Greece is desperately seeking a second €130 billion rescue fund from its private International creditors to repay a € 14.4 billion bond redemption due in March.

The troika of private creditors to Greece, that includes IMF, ECB and the European Commission, are relentlessly pressing for increase in tax, further cut in spending and wage cuts. The new threat has rattled Greece’s middle class who are already facing the heat from closing down of businesses, high unemployment rate and severe money crunch.

Pressure mounts on Greece to step up austerity measures

In a bid to pacify foreign lenders, the government of Greece has agreed to new spending cuts on Sunday. Though this may not unlock €130 billion bail-out fund Greece desperately needs to stave off bankruptcy, but it has kept open dialogues to resume on Monday. The troika of foreign lenders that have mounted pressure on Greek government are the European Central Bank (ECB), the European Commission and the International Monetary Fund (IMF).

The announcement was made on Sunday after a five-hour long meeting led by Greek Premier Lucas Papademos along with leaders of three main parties. In the meeting it was decided to bring down Greek spending by 1.5 percent of GDP in 2012 through various such measures as wage cuts, reduction in supplemental pensions, cut in social security contributions and bank recapitalization plan, etc.

Though the leaders of coalition government have broadly agreed on new austerity measures, consensus has to be reached on finer points. The troika of foreign creditors has put forward a slew of demands in exchange for fresh release of €130 billion Greek rescue fund. Important among them are – public sector workforce to be reduced to 1,50,000, cut in supplemental pensions, wage cuts in private sectors, etc. With unemployment hovering at around 19 percent and the country already in recession, it is certainly not going to be easy for Greek government to push through more stringent economic policies.

EU Summit gives thumps up to new fiscal pact

The first EU Summit of 2012 ended on Monday with leaders of 27 European nations agreeing to sign a new fiscal treaty, except Czech Republic and Britain. Once effective, the fiscal agreement would legally bind the member nations to implement tougher austerity measures and stricter enforcement rules in their respective country. To ensure its effective functioning, the proposed deal empowers the European Court of Justice with the right to impose fine on nations who fail to follow the new rules.

Also in the recently concluded European Summit, it was decided to bring into effect the European Stability Mechanism in July instead of 2013, which was the original plan. The €500 billion permanent bail-out fund formed on May last year was aimed to insulate the rest of Europe from debt crisis, especially from Greece.

Apart from these two issues, leaders of the European nations also discussed ways to generate employment and encourage small business growth. But, one key issue that has been left largely unanswered in the European Summit is the question of Greece debt crisis. Till Europe finds a comprehensive way to deal with Greece debt crisis, it is very likely that European debt crisis would continue to haunt Europe.

Greece rebuffs Germany’s proposal of external budget monitoring

Germany’s proposal to create a “budget commissioner” to oversee tax and spending decisions evoked a strong reaction from Greek finance minister, Evangelos Venizelos. The minister dismissed the plan saying that it is not only improper but an insult to Greek pride.

The proposal was made in exchange for €130 billion help as second emergency package to Greece. The country is in dire need of this fund to repay its debts due on March 20. But if the proposed agreement is reached that would give direct control to European Institutions (IMF, ECB and EU). They would then have the right to oversee or intervene (through the budget commissioner), on major budgetary policy decisions in Greece for a certain period.

The problem erupted in the wake of fear that the €130-billion proposed package may not be enough to address the debt crisis. A latest analysis also revealed that the second bail-out package would require additional funds to bring down Greece’s debt to a manageable total by the year 2020.

With taxpayers in Europe already reeling under debt crisis, the need for additional funds is seen as the biggest hindrance to broker a deal between Greece and its private creditors. But the immediate biggest concern is if an agreement is not reached before March 20th deadline, Greece could be the first defaulter among developed nations in a very long time.

Greece debt talk suffers a fresh setback

The ongoing negotiation between the government of Greece and the IIF (Institute of International Finance that includes representatives of private banks and investors) has come to a standstill over debt talk. The bone of contention is a fresh demand that Germany and the IMF (International Monetary Fund) is trying to clamp on private creditors of Greek government bonds. As both sides are refusing to budge from their positions, the issue of Greece’s outstanding debt remains unanswered.

Under the new demand, private bondholders are expected to accept lower interest rates on their Greek bonds. Plus, they are supposed to swap their existing bonds with new 30-year bonds with below 4 percent interest rate. Experts are of the opinion that for private investors this could amount to 60%-70% loss on Greek bonds.

An agreement on debt talk was expected to be reached by this Monday. The intention was to give lenders to Greece enough time to arrange for second rescue package of €130 billion prior to EU’s next Summit scheduled on January 30. With participation of private creditors mandatory for receiving further financial aid, the latest setback has cast a doubt on how Greece would come up with €14.5 billion debt repayment on 20th March.

Finding a solution to the latest crisis is important for leaders of EU. This would not only bring down Greece debt on a sustainable path, but would also have a positive impact on eurozone nations as a whole.

EU postpones its decision to save Greek government bonds

Fresh tension brewed in Europe when the three overseas money lenders (termed ‘troika’) deferred their plan to save Greek government bonds by writing off 50% of its debt. The decision was based on the inability of the Lucas Papademos’s interim government in implementing severe austerity measures in Greece, despite reaching an official agreement. The ‘troika’ included European officials representing the EU (European Union), the ECB (European Central Bank) and the IMF (International Monetary fund). They have cast a serious doubt on Greece’s ability and willingness to come out of debt crisis and may withhold the next aid installment due on March.

The situation further aggravated as negotiations between the Greek PM Lucas Papademos’s interim government and the Institute of International Finance (IIF) held on Friday met dead ends. The IIF that constituted members of private sector investors and banks had been engaged on a series of talks with the government on merits of accepting a “voluntarily” default in exchange for additional International aid. The intention was to force private holders of Greek government bonds to accept losses so as to bring down the country’s debt. But with the IIF officials backing out from absorbing losses, the possibility of uncontrolled Greek default is growing larger and so is its impact on Europe and other global economies.

Greece chooses Lucas Papademos as the new Prime Minister

Finally after days of eager anticipation, Greece has found its new interim Premier in the form of Lucas Papademos on Friday. Papademos, a much respected economist and also an ex- European Central Bank vice president is the new head of the interim three-party coalition government, the national unity government. He has replaced George Papandreou, leader of the Socialist party, Pasok. The new government is expected to push through the long-awaited tough austerity measures and steer the country away from the massive debt crisis.

The swearing-in ceremony was graced by the President of Greece Karolos Papoulias and spiritual head of the Greek Orthodox Church, Archbishop leyronymos. In the new 48-member cabinet are Evangelos Venizelos, who retains his finance minister portfolio, and Stavros Dimas, as the new foreign minister. Dimitris Avramopoulos holds the post of both defence minister and New Democracy law maker.

To retain its Euro zone membership, Greece under the leadership of Lucas Papademos has some toughest measures to take to deal with the ongoing debt crisis. Foremost are; implementation of tougher austerity measures, securing the release of the next installment (8 billion Euros aid) as per 2010 agreement, getting the sanction of 130 billion Euros rescue package and the sanction of 2012 budget (considered to be the toughest one) by the parliament.

Greek Premier to stand down to allow coalition government

Amidst intense pressure, the Prime Minister of Greece is going to step down on Monday to make way for a national unity government. The announcement was made on Sunday night by the Greece President Karolos Papoulias to assure EU leaders that Greece is serious about dealing with the debt crisis. Greece is currently on the verge of economic collapse and is desperate for the 130 billion Euros rescue package.

Before the announcement, Greek Premier, Papandreou, held talk with the head of the leading opposition, Antonis Samaras, and the President. It was agreed in the meeting that the interim coalition government, under a new Prime Minister, will work on the debt-relief agreement with the EU.

The Sunday's Presidential statement also stated that the two leaders, George Papandreou and Antonis Samaras, are going to meet on Monday. They will decide on the next Greece Prime Minister and the other ministers in the new ruling party. Both the leaders have agreed Feb 19, 2012 to be the suitable date for Greece Election.

In the new national unity government, both the Socialist party and the New Democracy party will have share. Both Greece and the EU leaders are expecting that the coalition government headed by a new Prime Minister will have backing of both the parties. He should be able to serve long enough to execute the new austerity measures needed for the fulfillment of the debt agreement and pass 2011 budget.

Papandreou secures the confidence vote

With the win of confidence vote on Saturday, the Prime Minister of Greece has tackled a crucial political crisis in the recent time. The victory stamps the official approval of the Greece parliament on the debt agreement reached with EU leaders last week. The win though came by a narrow margin, 153 to 145, is going to pave the way for the EU to sanction bail out package for Greece, needed to manage the current debt crisis. Saturday’s victory means, Greece is going to receive 8 billion Euros as relief installment from EU and IMF next month. This is expected to allow Greece to pay its next month’s bill and avoid immediate default.

As per the Greece bail out package, The EU along with IMF would finance a total of approximately 109 billion Euros in Greece debt. Major private sector banks in Europe has voluntarily agreed to contribute another 37 billion Euros. In exchange, Greece is expected to cut down on government jobs, reduce pensions and encourage privatization.

The vote ends a jittery week that started with Papandreou’s announcement of holding an election on Greece’s debt agreement. He was then forced into a humiliating climb-down not only by the EU leaders but also by the members of his own Socialist party, Pasok.

Also on Saturday, the Greece Prime Minister has called on the Greece President, Karolos Papoulias, to ask for his permission to help form a coalition government. He has expressed urgency to break through the controversial Greece rescue package. George Papandreou has also voiced his intention to step down to make way for the coalition government.