Belfast Telegraph

Markets rally as last-gasp Greek bailout deal agreed

By Geir Moulson and Elena Becatoros

Greece will receive its next batch of bailout loans in time to avoid a disastrous default, the country's finance minister said yesterday.

The comments came as stock markets around the world rallied on hopes the Greek prime minister will manage to persuade Germany's leader to help solve the crisis.

Reports that European leaders are considering bolder moves to relieve Greece and other countries of their debt burden have buoyed spirits in financial markets, though officials in Chancellor Angela Merkel's government have downplayed such speculation.

The current plan is to have Greece implement painful debt-reduction measures in exchange for rescue loans.

Greece's international creditors are holding up payment of the next batch of those loans until a review of the reforms is completed in the coming days. Without the money, Greece faces bankruptcy in mid-October, potentially sending shock waves through the financial sector in Europe and abroad.

"I am very confident in ... the disbursement of the sixth tranche," Finance Minister Evangelos Venizelos said, speaking above the sound of chanting from protesting tax office workers outside the ministry, who blew whistles and set off a fake siren. "But we must do what has been agreed."

The minister said the country had already made great efforts to achieve its fiscal targets, but that a "hyper-effort" was necessary to fully meet its commitments.

Some experts, however, say the current course of austerity is untenable and that Greece will need bigger debt relief. Analysts say that could be achieved by imposing tougher losses on private bondholders, boosting capital in European banks that would take such losses, and boosting the size of the rescue fund.

Under the current plan, Greece had originally expected debt inspectors from the International Monetary Fund, the European Central Bank and the European Commission to complete a review in September and approve the sixth installment of loans from its €110bn international bailout fund.

But the inspectors, known collectively as the troika, suspended their review earlier this month amid talk of missed targets and budget shortfalls.

Venizelos said the troika would return to Athens this week, and that the disbursement of the next bailout tranche, worth €8bn, would be done in time as there were several meetings in October during which other eurozone countries could approve the payment.

In Berlin, Greek premier George Papandreou told a conference of the Federation of German Industries that "we are borrowing to repay" - but also stressed that Europe needs to show it can get its act together.

"I can guarantee that Greece will live up to all its commitments," Papandreou said ahead of an evening meeting with Chancellor Angela Merkel. He promised that Greeks will "fight our way back to growth and prosperity."

Tomorrow, Germany's parliament is to vote on beefing up the powers and lending capacity of the eurozone's €440bn rescue fund - a facility that already has intervened to help Ireland and Portugal. However, German officials, facing distaste within Merkel's center-right coalition at the idea of endless bailouts, have sought to cool down expectations of further increases anytime soon.

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