Sources Say... No. 7908
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Contains fresh news. Please distribute immediately Sources say... No. 7908 DG Communication Brussels, Wednesday, 5 October 2011, at 17:05 Distribute only to Commission Officials & Agents Editor: Miguel Orozco Tel 60933 IMF SEEKS RADICAL CHANGE IN EURO CRISIS STRATEGY (AP) - The IMF, a key player in eurozone bailouts, on Wednesday pushed for radical changes in the way the region's debt crisis should be handled. Antonio Borges, the head of the IMF's Europe program, said the eurozone's bailout fund should get more firepower and new tools. To help, he said the IMF could intervene in bond markets to keep the crisis from engulfing large economies like Italy and Spain. The surprise proposal would profoundly alter the fund's role in the crisis. It has so far contributed close to €80 billion ($105 billion) to eurozone bailouts, about a third of the total, but never intervened in open markets. "We have a whole set of options that could be put on the table to restore confidence in those countries," Borges said at a news conference in Brussels. His comments are the first open acknowledgment of a radical change in approach by the IMF to the eurozone's debt crisis. In public statements until now, IMF officials had insisted on agreements made at a eurozone summit in July, which gave a first range of new powers to the region's bailout fund and tentatively offered a second, €109 billion bailout for Greece, with modest losses accepted by banks on their Greek investments. But Borges made clear on Wednesday that those decisions were no longer sufficient. He said that the €109 billion figure was an estimate based on conditions that have since changed, adding that a new program needed bigger focus on Greece's massive debt and growth. He said that didn't necessarily entail bigger losses for banks and other private Greek bond holders. Borges also piled pressure on Greece to take more stringent measures to get its economy back on track, saying there was no rush to take a decision on the payment on the next slice of bailout money because the country doesn't face a big bond repayment deadline until December. To build confidence, Borges backed a push to boost the impact of the eurozone's bailout fund by using its resources more creatively. In a new report on Europe released at the same time as the press conference, the IMF said the eurozone should consider using its crisis tools to guarantee bond issues from struggling countries. It also said eurozone countries should commit to indemnify the ECB against possible losses on purchases of shaky government bonds it has made so far. DETERMINED TO SAVE ITALY AND SPAIN Both these moves have been discussed as part of a plan to bolster the effectiveness of the €440 billion ($580 billion) bailout fund, the European Financial Stability Facility. Borges said the IMF is ready to help Europe support struggling Italy and Spain as soon as all countries have ratified the changes to the EFSF agreed in July. For instance, the IMF could help the eurozone's bailout fund to support the distressed bond markets in Italy and Spain by buying their bonds on the open market alongside the EFSF. The fund could also give the two countries precautionary credit lines, he added. He said Europe needs to take coordinated action on its banks to restore confidence in the financial sector. The IMF has previously said that it may cost as much as €200 billion to recapitalize lenders across the continent. "We are not saying that banks are in trouble and we are not saying that banks are weak," Borges said, but he stressed that there was a big crisis of confidence that could only be addressed through action at European level. In its report, the IMF says the EFSF should be empowered to directly recapitalize banks. (See details and full text of report Regional Economic Outlook: Europe: Navigating Stormy Waters) GREEK AID TRANCHE LIKELY BUT NOT ASSURED, SAYS TROIKA SOURCE (Reuters) - Inspectors from the IMF, EU and the ECB are likely to recommend releasing a vital tranche of aid to Greece but Athens must first do more to convince them it can implement reforms, a senior official from the "troika" said on Wednesday. Without the aid, Athens could run out of cash as early as next month, provoking a swift default that would drag the euro zone deeper into a debt crisis already shaking financial markets worldwide. The inspectors resumed their review of Greece last week, combing through new austerity plans nearly four weeks after leaving Athens over disagreements on the reforms needed to put its derailed finances back on track. "We are making progress but slow progress. The main reason is they (the government) need more time," the official told Reuters. "We are waiting for details on how reforms will be implemented." Asked if there was any chance that the sixth, 8-billion euro tranche of aid would not be released to Greece, the official said: "There's always a risk, it cannot be taken for granted. But I believe in the end we will make it." Talks between Athens and the inspectors are progressing well on the 2012 draft budget although the impact of some measures, such as a plan to shrink the public work force, are not yet fully evaluated, the official said. "So far we have not closed any of the chapters," the official said. LOOKING BEYOND 2012 "We are progressing smoothly on structural reforms. We have still not concluded on the fiscal side. There is good progress on 2012, but we have not yet discussed 2013-2014." The EU needs to get a clear picture of Athens' finances in 2013 and 2014 for its ongoing review of a second bailout agreed in July. "We have to be sure that the mid-term fiscal strategy is on track," the official said. Greece is running late on a privatisation target agreed with the EU and IMF because of delays in setting up the fund in charge of handling the sell-offs, the official said. The troika has repeatedly encouraged consolidation in the Greek banking sector and the official said it hoped to see more such developments after a merger deal between Alpha Bank and Eurobank . "We hope there will be more, both domestic and international," the official said. The official could not say when EU, IMF and ECB inspectors would end their review and deliver their verdict on the aid tranche. Greek officials have said they expect them to stay till the end of the week. Euro zone finance ministers and the IMF board will decide on releasing the aid after the inspectors conclude their review and draft a report on Greece's progress. Euro zone finance ministers on Monday postponed the aid payment until mid-November, piling pressure on Athens to deliver on reforms. GREEK STATE EMPLOYEES CLASH WITH POLICE IN ANTI-AUSTERITY DEMONSTRATIONS (AFP) - Des dizaines de milliers de fonctionnaires grecs ont manifesté mercredi à Athènes et Salonique (nord), jour de grève dans le secteur public, contre les récentes mesures d'austérité et le chômage partiel prévu pour 30.000 employés de ce secteur d'ici la fin de l'année. En marge de la manifestation à Athènes, qui a rassemblé 18.000 personnes, les forces anti-émeutes ont lancé des gaz lacrymogènes contre des dizaines de jeunes cagoulés qui jetaient des bouteilles et des pierres. Au moins deux manifestants ont été blessés, selon une source hospitalière ainsi qu'une photographe de l'AFP, frappée au visage avec le bouclier d'un policier. "Non au chômage partiel qui égale le licenciement", 1 proclamait la banderole principale du grand syndicat du public l'Adedy, à la tête du cortège, qui a rassemblé près de 18.000 personnes à Athènes, selon la police. Brandissant des drapeaux noirs, les archéologues du ministère de la Culture, les fonctionnaires des ministères des Finances, du Développement et les employés de l'entreprise publique de la gestion de l'Eau (Eydap) et des chemins de fer scandaient des slogans contre "la politique du gouvernement, de l'UE et du FMI". "Non au chômage partiel, non aux licenciements, non à la misère", pouvait-on lire sur la banderole des fonctionnaires du ministère du Développement. Des milliers de lycéens et étudiants scandaient "Nous voulons des livres, des professeurs, des écoles". Plusieurs écoles d'Athènes ont été occupées ces derniers jours, les lycéens protestant surtout contre le manque des livres. "Le gouvernement essaie de supprimer le rôle et l'oeuvre des ministères mais sans les ministères, l'Etat ne peut pas fonctionner (...) les hôpitaux, les écoles sont dans une situation très mauvaise", a déploré Rodoula Ivrou, fonctionnaire du ministère du Développement depuis plus de 30 ans. "Cent ans après l'instauration de l'inamovibilité des fonctionnaires, Papandréou veut la supprimer", ajoute-t-elle. Pour Frosso Iliopoulou, employée à l'organisme national des médicaments (Eof), "les fonctionnaires sont sortis dans les rues car ce sont eux qui sont le plus menacés, après avoir subi plus de 20% des coupures de leurs salaires en raison de l'austérité, et maintenant ils seront placés en chômage partiel". Près de 10.000 personnes ont manifesté à Salonique, deuxième ville grecque dans le nord. En raison de la grève des fonctionnaires, écoles et musées étaient fermés, les vols annulés, les hôpitaux fonctionnant au ralenti ainsi que les tribunaux en raison de la grève des avocats et des employés de la justice. Le mouvement affecte aussi certains trains et le fonctionnement des tribunaux, mais les transports publics urbains fonctionnaient à Athènes.