EU To Extend Greek Aid

Senior EU officials believe Greece will fail to reduce the nations debt as agreed in the €110 billion bailout deal made with EU and the IMF earlier this year. As a consequence, EU leaders are now considering an extension of the Greek aid.

“EU officials believe the Greek government will not be able to apply the hard conditions of the memorandum of understanding within the appointed time-frame.”

Greek Daily


EU officials are considering an extension to financial support for Greece, as analysts increasingly question to country’s ability to stand on its own feet by 2013, several Greek and European media reports.

The Greek newspaper, Ta Nea, reports that EU officials are considering an extension to the country’s aid package, due to doubts over investor appetite to return to Greek bond purchases.

The EU Troika: Mr. Martin Palous, Mr. Anders Liden, Mr. Pedro Serrano, Mr. Fernando M. Valenzuela.

“Senior EU officials believe the Greek government will not be able to apply the hard conditions of the memorandum of understanding [between Athens and its international lenders] within the appointed time-frame,” the Greek Daily writes.

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There are also questions marks over the center-left government’s ability to continue the pace of reforms, according to the EUobserver.com.

Concern about tax revenue collection will remain a major problem in a country tax evasion is almost like a tradition, the IMF is set to dispense a team of permanent officials to Athens.

Just Getting Worse

Despite the introduction of numerous unpopular tax increases and salary cuts, causing both international plaudits and protests in the streets, Greece’s debt to GDP ratio is still expected to reach 150% by 2013.

In May this year the EU and IMF agreed to provide Greece with a three-year €110 billion loan after weeks of spiraling borrowing costs in the international capital markets.

George Papandreou

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The condition was that the Greek government implemented a tough package of economic reforms.

But the recent austerity measures have contributed to the country’s recession.

The Greek economy set to shrink by four percent this year.

This in turn has complicated government efforts to cut its deficit from 13.6 percent in 2009 to 8.1 percent of GDP this year.

On The Road Again

During a two-day road show of European capitals last week in a bid to win back investors, Greek finance minister George Papaconstantinou repeatedly vowed that the government would not restructure its debt at any point.

When the Greek PM, George Papandreou, visited Oslo/Norway last week, he  claimed that investors confidence was about to return to Greece, pointing to the Norwegian Pension Fund Global (SWF) who’s been shopping for large chunks of Greek bonds lately.

However, the Norwegian SW fund seem to be about the only one:

The Consensus Demand Meter, Q3 2010.

Ireland‘s Endless Corner

Doubts over a second euro zone country – Ireland – have also increased in the recent days.

Ireland’s shaky banking sector has led to growing fears amongst the market participants.

Last Friday 10-year bond Irish bond yields moved over six percent, 3.7 percent higher than their German equivalents, after a Barclays report said  that Dublin could be forced to seek external aid at some point if conditions worsen.

Brian Lenihan

According to the Sunday Telegraph, Irish finance minister Brian Lenihan rejects speculation that the cost of bailing out the country’s banking system will force the government to turn to an EU-IMF emergency fund, like the Greek bailout deal.

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However, the Irish finance minister have been forced to make some turns before.

Here’s a quote from a speech Brian Lenihan held on December 10th last year:

“The inauguration of John F Kennedy as President of the United States in 1961 gave a powerful sense of hope, possibility and self-belief to Irish people all over the world,” he said, speaking about how the Irish people wanted the country to start believing in itself again.

He had earlier declared that the “worst is over” and that “we are now on the road to economic recovery”.

“As we begin to emerge from the unrelenting economic gloom of the last 18 months, we need to rediscover our optimism and our self-belief.”

He concluded by stating: “Our plan is working.We have turned the corner.”

Well, tomorrow (Tuesday) Mr. Lenihan will turn/return to the capital markets in an attempt to sell €1.5 billion in Irish bonds…

Related by the Econotwist:

Summer’s Over; Greek Protests Continues

Default Now Or Default Later; Greece Still Withholding Critical Data

Brussels Tells Athens To Shut Up And Take The Pain

Ireland Downgraded By Moody’s

Bundesbank: Ireland Will Destroy The Euro Zone

Morgan Stanley: Governments WILL Default

People’s Confidence In The EU Drops To Record Low

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3 responses to “EU To Extend Greek Aid

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