Sunday, June 5, 2011

EU Preparing new aid package for Greece

European Union officials will focus on preparing a new aid package forGreece that includes a “voluntary” role for investors after the EU and the International Monetary Fund approved the fifth installment of Greece’s 110 billion-euro ($161 billion) bailout.
“I expect the euro group to agree to additional financing to be provided to Greece under strict conditionality,” Luxembourg Prime Minister Jean-Claude Juncker said after meeting with Greek Prime Minister George Papandreou in Luxembourg on June 3. “This conditionality will include private-sector involvement on a voluntary basis.”
Papandreou agreed to 78 billion euros in additional austerity measures and asset sales through 2015 to secure the 12 billion-euro bailout payment and meet conditions for receiving an additional rescue package. He agreed to make “significant” cuts in public-sector employment and establish an agency to manage accelerated asset sales, according to a statement released in Athens on June 3. The plan is fueling popular opposition and protests across Greece.
Greek bonds gained on the prospect of a new aid plan, with the yield on the country’s two-year notes falling 172 basis points yesterday to 22.8 percent, the lowest since April 20. The agreements came at the end of a week when Greece’s fiscal crisis worsened enough for Moody’s Investors Service to raise the probability of a default to 50 percent.