maria-petrakis

Greece Cut to Junk by Moody&rsquos on &lsquoSubstantial&rsquo Risks

by on June 15, 2010

By Ben Martin and Maria Petrakis June 15 (Bloomberg) — Greece’s credit rating was cut to non-investment grade, or junk, by Moody’s Investors Service, threatening to further undermine demand for the debt-strapped nation’s assets as it struggles to rein in its budget deficit. In making the four-step downgrade to Ba1 from A3, Moody’s cited “substantial” risks to economic growth from the austerity measures tied to a 110 billion-euro ($134.5 billion) aid package from the European Union and the International Monetary Fund. The lower rating “incorporates a greater, albeit, low risk of default,” Moody’s said in a statement yesterday in London. The outlook is stable, it said. Greece has cut spending, raised taxes and trimmed wages to tackle the deficit, which swelled to 13.6 percent of gross domestic product last year, more than four times the EU limit. To secure the EU-IMF aid, the government pledged to trim the shortfall to 8.1 percent of GDP this year and bring it back under the 3 percent EU ceiling in 2014. The crisis has prompted investors to sell the bonds of Greece and other high-deficit nations and pushed the euro down 15 percent this year. “We’ve got a lot of uncertainty around the growth outlook for Greece,” Sarah Carlson , vice president-senior analyst in Moody’s sovereign-risk group, said in a telephone interview yesterday. “It’s rare for a country to implement so much structural reform in a very short time.” Austerity Measures The austerity measures agreed to last month by the government of Prime Minister George Papandreou will amount to almost 14 percent of GDP over four years. The program, which also includes sweeping reforms to the country’s pension and labor markets, has prompted street protests and strikes, including one in which three people died. Greece, which already was rated junk by Standard & Poor’s, said the downgrade by Moody’s “does not reflect in any way Greece’s progress over the past months,” according to a statement from the Finance Ministry in Athens. The deficit narrowed 38.8 percent to 8.97 billion euros in the first five months of the year, beating the 35 percent target in the country’s budget plan, the ministry said on June 10. While the EU-IMF “package effectively eliminates any near- term risk of a liquidity-driven default,” Moody’s said, there remains “considerable uncertainty surrounding the timing and impact of these measures on the country’s economic growth, particularly in a less supportive global economic environment.” Greek Bonds The euro pared gains against the dollar after the downgrade and traded at $1.2230 late yesterday in London, up 1 percent on the day, after advancing to $1.2299 earlier. The yield on 10- year Greek bonds gained 18 basis points and the premium investors demand to hold Greece’s securities over benchmark German bunds rose eight basis points to 568 points. “This doesn’t look good and I expect another round of sell-off,” said Christoph Rieger , co-head of fixed-income strategy at Commerzbank AG in Frankfurt, Germany’s second- largest bank. “A junk status means it will fall out of some benchmark indices. People who use those benchmarks are likely to sell.” EU and IMF officials traveled to Athens yesterday as part of regular checks on the government’s budget plans. EU spokesman Amadeu Altafaj told reporters in Brussels that the 27-nation bloc is “optimistic” about Greece’s ability to implement the program. Deutsche Bank AG Chief Executive Officer Josef Ackermann , reversing earlier remarks, said last week that he is “confident” Greece can repay its debt because of “the personal commitment given by the prime minister to implement the necessary reforms.” Bondholders S&P cut Greece’s credit rating to non-investment grade on April 27, the first time a euro member lost its investment grade since the euro’s 1999 debut. S&P warned that bondholders could recover as little as 30 percent of their initial investment if the country restructures its debt. In its downgrade yesterday, Moody’s said its “base-case scenario envisions Greece implementing the policy changes it needs to stabilize its debt-to-GDP ratio at around 150 percent by 2013.” Debt will totaled 125 percent of GDP this year, according to European Commission forecasts. “Should the economy respond positively to the competitiveness-enhancing structural reforms, debt stabilization could be achieved earlier,” Moody’s said. Moody’s also downgraded its rating on the city of Athens to Ba1 from A3, citing “the uncertainties arising from current reforms on the city’s finances.” Athens and other Greek municipalities “are unlikely to have enough financial flexibility to permit their credit quality to be stronger than that of the sovereign itself,” it said. To contact the reporters on this story: Ben Martin in London bmartin38@bloomberg.net ; Maria Petrakis in Athens at mpetrakis@bloomberg.net .

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Greece Cut to Junk by Moody&rsquos on &lsquoSubstantial&rsquo Risks

Greece Cut to Junk by Moody&rsquos on &lsquoSubstantial&rsquo Risks

by on June 15, 2010

By Ben Martin and Maria Petrakis June 15 (Bloomberg) — Greece’s credit rating was cut to non-investment grade, or junk, by Moody’s Investors Service, threatening to further undermine demand for the debt-strapped nation’s assets as it struggles to rein in its budget deficit. In making the four-step downgrade to Ba1 from A3, Moody’s cited “substantial” risks to economic growth from the austerity measures tied to a 110 billion-euro ($134.5 billion) aid package from the European Union and the International Monetary Fund. The lower rating “incorporates a greater, albeit, low risk of default,” Moody’s said in a statement yesterday in London. The outlook is stable, it said. Greece has cut spending, raised taxes and trimmed wages to tackle the deficit, which swelled to 13.6 percent of gross domestic product last year, more than four times the EU limit. To secure the EU-IMF aid, the government pledged to trim the shortfall to 8.1 percent of GDP this year and bring it back under the 3 percent EU ceiling in 2014. The crisis has prompted investors to sell the bonds of Greece and other high-deficit nations and pushed the euro down 15 percent this year. “We’ve got a lot of uncertainty around the growth outlook for Greece,” Sarah Carlson , vice president-senior analyst in Moody’s sovereign-risk group, said in a telephone interview yesterday. “It’s rare for a country to implement so much structural reform in a very short time.” Austerity Measures The austerity measures agreed to last month by the government of Prime Minister George Papandreou will amount to almost 14 percent of GDP over four years. The program, which also includes sweeping reforms to the country’s pension and labor markets, has prompted street protests and strikes, including one in which three people died. Greece, which already was rated junk by Standard & Poor’s, said the downgrade by Moody’s “does not reflect in any way Greece’s progress over the past months,” according to a statement from the Finance Ministry in Athens. The deficit narrowed 38.8 percent to 8.97 billion euros in the first five months of the year, beating the 35 percent target in the country’s budget plan, the ministry said on June 10. While the EU-IMF “package effectively eliminates any near- term risk of a liquidity-driven default,” Moody’s said, there remains “considerable uncertainty surrounding the timing and impact of these measures on the country’s economic growth, particularly in a less supportive global economic environment.” Greek Bonds The euro pared gains against the dollar after the downgrade and traded at $1.2230 late yesterday in London, up 1 percent on the day, after advancing to $1.2299 earlier. The yield on 10- year Greek bonds gained 18 basis points and the premium investors demand to hold Greece’s securities over benchmark German bunds rose eight basis points to 568 points. “This doesn’t look good and I expect another round of sell-off,” said Christoph Rieger , co-head of fixed-income strategy at Commerzbank AG in Frankfurt, Germany’s second- largest bank. “A junk status means it will fall out of some benchmark indices. People who use those benchmarks are likely to sell.” EU and IMF officials traveled to Athens yesterday as part of regular checks on the government’s budget plans. EU spokesman Amadeu Altafaj told reporters in Brussels that the 27-nation bloc is “optimistic” about Greece’s ability to implement the program. Deutsche Bank AG Chief Executive Officer Josef Ackermann , reversing earlier remarks, said last week that he is “confident” Greece can repay its debt because of “the personal commitment given by the prime minister to implement the necessary reforms.” Bondholders S&P cut Greece’s credit rating to non-investment grade on April 27, the first time a euro member lost its investment grade since the euro’s 1999 debut. S&P warned that bondholders could recover as little as 30 percent of their initial investment if the country restructures its debt. In its downgrade yesterday, Moody’s said its “base-case scenario envisions Greece implementing the policy changes it needs to stabilize its debt-to-GDP ratio at around 150 percent by 2013.” Debt will totaled 125 percent of GDP this year, according to European Commission forecasts. “Should the economy respond positively to the competitiveness-enhancing structural reforms, debt stabilization could be achieved earlier,” Moody’s said. Moody’s also downgraded its rating on the city of Athens to Ba1 from A3, citing “the uncertainties arising from current reforms on the city’s finances.” Athens and other Greek municipalities “are unlikely to have enough financial flexibility to permit their credit quality to be stronger than that of the sovereign itself,” it said. To contact the reporters on this story: Ben Martin in London bmartin38@bloomberg.net ; Maria Petrakis in Athens at mpetrakis@bloomberg.net .

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Greece Cut to Junk by Moody&rsquos on &lsquoSubstantial&rsquo Risks

Greece Cut to Junk by Moody&rsquos on &lsquoSubstantial&rsquo Economic Risks

June 14, 2010

By Ben Martin and Maria Petrakis June 15 (Bloomberg) — Greece’s credit rating was cut to non-investment grade, or junk, by Moody’s Investors Service, threatening to further undermine demand for the debt-strapped nation’s assets as it struggles to rein in its budget deficit. In making the four-step downgrade to Ba1 from A3, Moody’s cited “substantial” risks to economic growth from the austerity measures tied to a 110 billion-euro ($134.5 billion) aid package from the European Union and the International Monetary Fund. The lower rating “incorporates a greater, albeit, low risk of default,” Moody’s said in a statement yesterday in London. The outlook is stable, it said. Greece has cut spending, raised taxes and trimmed wages to tackle the deficit, which swelled to 13.6 percent of gross domestic product last year, more than four times the EU limit. To secure the EU-IMF aid, the government pledged to trim the shortfall to 8.1 percent of GDP this year and bring it back under the 3 percent EU ceiling in 2014. The crisis has prompted investors to sell the bonds of Greece and other high-deficit nations and pushed the euro down 15 percent this year. “We’ve got a lot of uncertainty around the growth outlook for Greece,” Sarah Carlson , vice president-senior analyst in Moody’s sovereign-risk group, said in a telephone interview yesterday. “It’s rare for a country to implement so much structural reform in a very short time.” Austerity Measures The austerity measures agreed to last month by the government of Prime Minister George Papandreou will amount to almost 14 percent of GDP over four years. The program, which also includes sweeping reforms to the country’s pension and labor markets, has prompted street protests and strikes, including one in which three people died. Greece, which already was rated junk by Standard & Poor’s, said the downgrade by Moody’s “does not reflect in any way Greece’s progress over the past months,” according to a statement from the Finance Ministry in Athens. The deficit narrowed 38.8 percent to 8.97 billion euros in the first five months of the year, beating the 35 percent target in the country’s budget plan, the ministry said on June 10. While the EU-IMF “package effectively eliminates any near- term risk of a liquidity-driven default,” Moody’s said, there remains “considerable uncertainty surrounding the timing and impact of these measures on the country’s economic growth, particularly in a less supportive global economic environment.” Greek Bonds The euro pared gains against the dollar after the downgrade and traded at $1.2230 late yesterday in London, up 1 percent on the day, after advancing to $1.2299 earlier. The yield on 10- year Greek bonds gained 18 basis points and the premium investors demand to hold Greece’s securities over benchmark German bunds rose eight basis points to 568 points. “This doesn’t look good and I expect another round of sell-off,” said Christoph Rieger , co-head of fixed-income strategy at Commerzbank AG in Frankfurt, Germany’s second- largest bank. “A junk status means it will fall out of some benchmark indices. People who use those benchmarks are likely to sell.” EU and IMF officials traveled to Athens yesterday as part of regular checks on the government’s budget plans. EU spokesman Amadeu Altafaj told reporters in Brussels that the 27-nation bloc is “optimistic” about Greece’s ability to implement the program. Deutsche Bank AG Chief Executive Officer Josef Ackermann , reversing earlier remarks, said last week that he is “confident” Greece can repay its debt because of “the personal commitment given by the prime minister to implement the necessary reforms.” Bondholders S&P cut Greece’s credit rating to non-investment grade on April 27, the first time a euro member lost its investment grade since the euro’s 1999 debut. S&P warned that bondholders could recover as little as 30 percent of their initial investment if the country restructures its debt. In its downgrade yesterday, Moody’s said its “base-case scenario envisions Greece implementing the policy changes it needs to stabilize its debt-to-GDP ratio at around 150 percent by 2013.” Debt will totaled 125 percent of GDP this year, according to European Commission forecasts. “Should the economy respond positively to the competitiveness-enhancing structural reforms, debt stabilization could be achieved earlier,” Moody’s said. Moody’s also downgraded its rating on the city of Athens to Ba1 from A3, citing “the uncertainties arising from current reforms on the city’s finances.” Athens and other Greek municipalities “are unlikely to have enough financial flexibility to permit their credit quality to be stronger than that of the sovereign itself,” it said. To contact the reporters on this story: Ben Martin in London bmartin38@bloomberg.net ; Maria Petrakis in Athens at mpetrakis@bloomberg.net .

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Greece to Reduce Spending, Raise Taxes as Part of EU-IMF Package: Summary

May 2, 2010

By Maria Petrakis and Natalie Weeks May 3 (Bloomberg) — Greece outlined the conditions it accepted in return for a bailout from the European Union and International Monetary Fund of more than 100 billion euros ($133 billion). Following is a summary of a Greek-language document distributed by the Finance Ministry in Athens yesterday. Implementation: * Greece’s progress in achieving targets will monitored on a quarterly basis. “Normal” continuation of the financing will depend on its success in reaching the goals. Spending Cuts: *Reducing the so-called 13th and 14th holiday payments for civil servants and cutting bonuses by a further 8 percent to save 1.1 billion euros in 2010. Workers earning less than 3,000 euros a month will get payments of 250 euros at Easter, 250 euros in summer and 500 euros at Christmas. Employees at state- run companies will have wages cut by 3 percent. *Reducing the 13th and 14th holiday payments to pensioners to save 1.5 billion euros in 2010. Retirees receiving less than 2,500 euros per month will get 200 euros, 200 euros and 400 euros for each period. *Postponing the second tranche of so-called solidarity bonuses to 2.5 million poorer Greeks, a pre-election pledge, to save 400 million euros in 2010. *Cutting public investment plan by 500 million euros this year. Revenue Raising: *An increase in the two main sales-tax rates to 23 percent from 21 percent and to 11 percent from 10 percent. That’s equivalent to 800 million euros in 2010 and 1 billion euros in 2011. *Cigarette, fuel and alcohol tax increases to raise 450 million euros in 2010 and 600 million euros in 2011. Economic Forecasts: * Economic contraction of 4 percent this year and 2.6 percent in 2011. Growth will return in 2012 at 1.1 percent and 2.1 percent in 2013 and 2014. *Debt will rise from 133.3 percent of GDP this year to 145.1 percent in 2011, 148.6 in 2012 and peak at 149.1 percent in 2013. It is projected to fall to 144.3 percent in 2014. * Budget deficit will shrink to 8.1 percent this year, 7.6 percent next year, 6.5 percent in 2012, 4.9 percent in 2013 and below the 3 percent demanded by the European Union in 2014. To contact the reporters on this story: Maria Petrakis at mpetrakis@bloomberg.net ; Natalie Weeks in Athens nweeks2@bloomberg.net

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Greece Faces `Unprecedented’ Cuts as Ministers Meet on $159 Billion Rescue

April 30, 2010

By Jonathan Stearns and Maria Petrakis May 1 (Bloomberg) — Greek Finance Minister George Papaconstantinou said Greece faces “unprecedented” budget cuts as the euro region and International Monetary Fund near approval of a 120 billion-euro ($159 billion) bailout for the debt- stricken nation. Greece must brace itself for “very demanding tasks,” Papaconstantinou said yesterday in Athens, where the government is wrapping up talks with the IMF and EU on conditions for the three-year loans. “We are at a critical point in the history of our country.” European finance ministers plan to meet tomorrow to approve their share of the bailout meant to stop the biggest crisis in the euro’s 11-year history. While Greek stocks and bonds rebounded after German Chancellor Angela Merkel said April 28 the EU must speed up its response, the crisis rippled through the euro area. Standard & Poor’s downgraded Greece to junk this week and followed with cuts to Portugal and Spain. The Greek government may agree in the face of public protests to budget cuts worth 24 billion euros, or around 10 percent of gross domestic product, as a condition for the aid package, Greece’s NET Radio said. Measures may include a three- year wage freeze for public workers and the elimination of two of their 14 annual salary payments, the ADEDY union said. Mounting Discontent “Huge doubts remain about the ability of the Greek government to implement these policy changes amid mounting signs of discontent within the population,” Michael Saunders and other economists at Citigroup Inc. said in an e-mailed note. “Even in the event of a successful implementation of the measures, risks remain of a vicious spiral between tighter fiscal policy and collapsing real growth.” Details of the loan conditions will emerge when the Athens talks conclude. Expectations the negotiations would end today prompted Luxembourg Prime Minister Jean-Claude Juncker , who leads the group of euro-area finance ministers, to convene the meeting to ratify the agreement at 4 p.m. in Brussels tomorrow. The euro area aims to contribute two-thirds of the total aid for Greece and disbursing that share, including as much as 30 billion euros for 2010, requires the unanimous approval of the region’s national governments. Finance ministers will ratify at least the first year at contributions tomorrow. The pending Greek wage cuts will overshadow today’s annual Labor Day celebrations in Athens, usually marked by rallies and picnics, which unions called on Greeks to join before the “coming storm.” The slogan is: “The Croesus-es should pay for the crisis,” a reference to the ancient king renowned for his wealth. Risk Rises Stocks and bonds fell this week after Merkel’s initial reluctance to approve disbursing funds to Greece stoked concerns about a default. The extra yield that investors demand to hold Greek debt over bunds exceeded 800 basis points on April 28. The spreads on Portuguese, Spanish and Irish debt also jumped, with the premium on Portugal’s 10-year bonds rising as high as 299 basis points on April 28. Signs of a renewed drive to tackle Greece’s troubles then helped spark a recovery. European Central Bank President Jean- Claude Trichet on April 29 said policy makers must create a “sense of direction” to help overcome the fiscal crisis. Greece’s ASE benchmark general index rose 2.2 percent yesterday, extending a 7 percent gain the previous day. The yield on Greek 10-year government bonds, which surged to 11.406 percent on April 28, was at 9.45 percent. Papandreou is caught between investors, who want faster deficit cuts, and voters and unions, who are already chafing at existing austerity measures. Elected in October on pledges to raise wages for public workers, Papandreou has been forced to cut salaries, curb spending and increase taxes to reduce a deficit that was more than four times the EU limit last year. Other deficit-cutting steps include increasing sales tax and raising the cap on the number of workers who can be fired to 4 percent from 2 percent, Kathimerini newspaper reported, without saying where it got the information. To contact the reporters on this story: Jonathan Stearns in Athens at jstearns2@bloomberg.net ; Maria Petrakis in Athens at mpetrakis@bloomberg.net

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Papandreou Makes Austerity Pitch as Unions Slam `Unjust’ Bailout Measures

April 29, 2010

By Maria Petrakis and Natalie Weeks April 30 (Bloomberg) — Prime Minister George Papandreou is starting his sales pitch to the Greek people as unions denounce as “unjust” budget cuts linked to a potential $159 billion European Union bailout. “We find ourselves before the most savage, unprovoked and unjust attack,” said Spyros Papaspyros , head of the ADEDY civil servants union, in Athens late yesterday after meeting Papandreou. “The answer will be given in the street.” Greek officials will reach agreement with the EU and the International Monetary Fund in the next days on budget cuts that may be worth 24 billion euros ($32 billion). While signs of an accord ended a bond market selloff in Europe yesterday, Moody’s Investors Service warned that Greece could be vulnerable to a “multi-notch” downgrade if measures don’t go far enough. Steps may include a three-year wage freeze for public workers and cutting two of the 14 salary payments that they receive annually, the ADEDY union said. Greece’s NET Radio said yesterday that cuts could amount to 10 percentage points of gross domestic product. The deficit was 13.6 percent in 2009. “It’s a tall order to assume that Greeks will be convinced because for years they have been used to getting a different type of treatment from their governments,” said Michael Massourakis , chief economist at Alpha Bank, the country’s third largest, in a telephone interview. “Papandreou doesn’t have the luxury of choosing the context or pace of the adjustment.” Retailers plan to shut their stores on May 5, joining a strike organized by the GSEE union, the country’s largest. Multi-Notch Cut? Greece’s credit rating was cut to junk this week by S&P and Moody’s Investors Service, which currently has an A3 rating on the country, said its decision will depend on the measures announced by the EU and the IMF. Other deficit-cutting steps include increasing sales tax and raising the cap on the number of workers who can be fired to 4 percent from 2 percent, Kathimerini newspaper said, citing no one. “We will do what is needed for the salvation of the country,” Papandreou said, according to the e-mailed transcript of his comments to union and business representatives. It didn’t give details of the austerity measures. The yield on the Greek 10-year government bond, which surged to 11.406 percent on April 28, fell 91 basis points to 9.04 percent yesterday as officials speed up efforts to finalize a rescue package. The ASE benchmark general index , which has lost nearly a fifth of its value this year, jumped 7 percent, the most since December. National Bank of Greece SA soared 18 percent. ‘Tough Package’ “The financial support will give Greece sufficient breathing space from pressures of financial markets,” EU Monetary Affairs Commissioner Olli Rehn said yesterday. Papandreou is stuck between investors, who want faster deficit cuts, and voters and unions, who are already chafing from existing austerity measures. Elected in October on pledges to raise wages for public workers, Papandreou has been forced to cut salaries, curb spending and raise taxes to reduce a deficit that was more than four times the EU’s limit last year. “We were and are the champions of change,” Papandreou said April 28. “We know we must put our economy in order if we are to survive.” The time has come to move on from “watching the spreads go up and down, usually more up than down.” “I got a taste of a very tough package,” Yannis Panagopoulos, head of the GSEE union, said after meeting Papandreou. He described it as “arbitrary and unjust.” Voters’ anger has been partly focused on the IMF and the political risks facing Papandreou are highlighted by the IMF’s most recent involvement in Europe. Pension Cuts In Hungary, the first EU member to turn to the Washington- based lender, voters this month ousted the ruling Socialist party two years after they accepted a bailout. Fiscal conditions attached to the $27 billion loan exacerbated the country’s recession as unemployment soared to a record, souring support for the government. Sixty-five percent of Greek voters polled by researcher Alco for the Proto Thema newspaper last week said Papandreou must reject any measures that lead to more wage and pension cuts. Europe’s fiscal crisis worsened this week after Germany’s reluctance to approve emergency funds sparked a drop in Greek bonds and S&P followed its Greek downgrade with cuts of Portugal and Spain. Papandreou, who said last week that his country faces a “new Odyssey,” will now have to convince to voters that they don’t have a choice, said Alpha Bank’s Massourakis. Even after yesterday’s bond market rally, Greece must pay 12.57 percent to borrow for two years. Germany pays 0.79 percent. “It’ll be difficult, but at end of the day people will realize that these are necessary because the country doesn’t have access to borrowing any more,” he said. To contact the reporters on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net Natalie Weeks in Athens at nweeks2@bloomberg.net .

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Papandreou Makes Austerity Pitch as Unions Slam Cuts Tied to Bailout Plan

April 29, 2010

By Maria Petrakis and Natalie Weeks April 29 (Bloomberg) — Prime Minister George Papandreou is starting his sales pitch to the Greek people as unions denounce as “unjust” budget cuts linked to a potential $159 billion European Union bailout. “We find ourselves before the most savage, unprovoked and unjust attack,” said Spyros Papaspyros , head of the ADEDY civil servants union, after meeting Papandreou in Athens today. “The answer will be given in the street.” Greek officials will conclude talks with the EU and the International Monetary Fund in the next days as signs of agreement ended a bond market selloff that cascaded through the euro region this week. Measures may include a three-year wage freeze for public workers and cutting two of the 14 salary payments that they receive annually, the ADEDY union said. Greece’s NET Radio said cuts may amount to 10 percentage points of gross domestic product, equivalent to around 24 billion euros ($32 billion). The deficit was 13.6 percent of GDP in 2009. Retailers said today they’ll shut their stores on May 5, joining a strike organized by the GSEE union, the country’s largest. “It’s a tall order to assume that Greeks will be convinced because for years they have been used to getting a different type of treatment from their governments,” said Michael Massourakis , chief economist at Alpha Bank, the country’s third largest, in a telephone interview. “Papandreou doesn’t have the luxury of choosing the context or pace of the adjustment.” Breathing Space Other proposals include increasing sales tax and raising the cap on the number of workers who can be fired to 4 percent from 2 percent, Kathimerini newspaper said today, without citing anyone. “We will do what is needed for the salvation of the country,” Papandreou said, according to the e-mailed transcript of his comments to union and business representatives today. It didn’t give details of the austeriry measures. The yield on the Greek 10-year government bond, which surged to 11.406 percent yesterday after Standard & Poor’s cut its credit rating to junk, fell 91 basis points to 9.04 percent today as officials speed up efforts to finalize a rescue package. The ASE benchmark general index , which has lost nearly a fifth of its value this year, jumped 7 percent today, the most since December. National Bank of Greece SA soared 18 percent. “The financial support will give Greece sufficient breathing space from pressures of financial markets,” EU Monetary Affairs Commissioner Olli Rehn told reporters in Brussels today. ‘Tough Package’ Papandreou is stuck between investors, who want faster deficit cuts, and voters and unions, who are already chafing from existing austerity measures. Elected in October on pledges to raise wages for public workers, Papandreou has been forced to cut salaries, curb spending and raise taxes to reduce a deficit that was more than four times the EU’s limit last year. “We were and are the champions of change,” Papandreou said yesterday. “We know we must put our economy in order if we are to survive.” The time has come to move on from “watching the spreads go up and down, usually more up than down.” “I got a taste of a very tough package,’’ Yannis Panagopoulos, head of the GSEE union, said after meeting Papandreou. He described it as “arbitrary and unjust.” Voters’ anger has been partly focused on the IMF and the political risks facing Papandreou are highlighted by the IMF’s most recent involvement in Europe. Pension Cuts In Hungary, the first EU member to turn to the Washington- based lender, voters this month ousted the ruling Socialist party two years after they accepted a bailout. Fiscal conditions attached to the $27 billion loan exacerbated the country’s recession as unemployment soared to a record, souring support for the government. Sixty-five percent of Greek voters polled by researcher Alco for the Proto Thema newspaper last week said Papandreou must reject any measures that lead to more wage and pension cuts. Europe’s fiscal crisis worsened this week after Germany’s reluctance to approve emergency funds sparked a drop in Greek bonds and S&P followed its Greek downgrade with cuts of Portugal and Spain. Papandreou, who said last week that his country faces a “new Odyssey,” will now have to convince to voters that they don’t have a choice, said Alpha Bank’s Massourakis. Even after today’s bond market rally, Greece must pay 12.57 percent to borrow for two years. Germany pays 0.79 percent. “It’ll be difficult, but at end of the day people will realize that these are necessary because the country doesn’t have access to borrowing any more,” he said. To contact the reporters on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net Natalie Weeks in Athens at nweeks2@bloomberg.net .

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Papandreou Starts Austerity Pitch to Greeks as EU Says Bailout Almost Done

April 29, 2010

By Maria Petrakis and Paul Tugwell April 29 (Bloomberg) — Greek Prime Minister George Papandreou began trying to persuade labor unions to accept further austerity measures as the European Union said it’s close to agreeing on a bailout that will stave off a default. As Papandreou started his pitch, Greek bonds jumped on optimism a package amounting to 120 billion euros ($159 billion) will help the government meet debt obligations over the next three years. “I got a taste of a very tough package,’’ Yannis Panagopoulos, head of Greece’s biggest union, said in comments broadcast on state-run NET Radio after meeting Papandreou. Panagopoulos, whose union will hold a general strike on May 5, described the measures as “arbitrary and unjust.” He didn’t give details on what they entail. Greek officials will conclude talks with the EU and International Monetary Fund in the next few days after a bond market rout pushed the country’s two-year borrowing costs to 24 percent. The crisis worsened this week after Standard & Poor’s cut Greece’s rating to junk and investors started to shun the bonds of other countries struggling to cut their deficits. As part of the agreement hammered out with the EU and the IMF, the government may cut two of the 14 monthly salaries paid to civil servants and increase value-added tax rates, Kathimerini newspaper reported, without citing anyone. Other plans include raising the cap on the number of workers who can be fired to 4 percent from 2 percent. Stock Rally Papandreou’s government was told to cut the budget deficit, which may have topped 14 percent last year, by 10 percentage points in 2010 and 2011, NET Radio said. The station didn’t say how it got the information. Bonds and stocks rallied after EU Economic and Monetary Affairs Commissioner Olli Rehn said he is confident aid discussions will conclude in a few days. Greek 10-year bond yields fell to as low as 8.9 percent from 9.8 percent. The ASE benchmark general index jumped 7 percent, the most since December. National Bank of Greece SA soared 16 percent. “The financial support will give Greece sufficient breathing space from pressures of financial markets,” Rehn told reporters in Brussels today. “This is done not only because of Greece but for every euro member state and its citizens to safeguard financial stability in Europe and globally.” Merkel Pledge German Chancellor Angela Merkel yesterday pledged to step up efforts to overcome the crisis after the euro fell to the lowest in a year and S&P followed its Greek cut with downgrades of Spain and Portugal. Officials from the EU, the European Central Bank and the IMF, dubbed the “troika” by the Greek press, are in Athens working out details of the loan package that would provide about 45 billion euros this year. IMF Managing Director Dominique Strauss-Kahn told German parliamentary leaders yesterday that Greece may need as much as 120 billion euros over the three-year horizon of the deficit plan, German Green Party lawmaker Juergen Trittin said yesterday. Dimitris Daskalopoulos , the head of the Federation of Greek Industries, said the biggest employer group is prepared to support the government’s plans. “Our will is a given,” he said today after meeting with Papandreou. “Businesses can and will contribute. We can see better days.” Platform Papandreou is stuck between investors who want faster deficit cuts and voters and unions who are uncomfortable with further austerity measures. Elected in October on pledges to raise wages for public workers, Papandreou has been forced to cut salaries, curb spending and raise taxes to reduce a deficit that was more than four times the EU’s limit last year. That’s not enough for some investors. Borrowing costs for Greece, which has the second-highest debt ratio in the EU, have soared amid market concern that the country may default on its debt. The extra yield that investors demand to hold Greek 10- year bonds over German bunds exceeded 800 basis points this week. To contact the reporter on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net .

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Papandreou Slammed by Greek Unions, Opposition for Requesting Rescue Funds

April 23, 2010

By Maria Petrakis April 23 (Bloomberg) — Greek unions and opposition political parties slammed Prime Minister George Papandreou for seeking a bailout from the European Union and International Monetary Fund that will bring more austerity measures. ADEDY, the Athens-based federation representing the more than 500,000 Greek civil servants who have seen wages cut this year, said the move signaled a new and “barbaric attack,” and called a protest rally for April 27. Another demonstration has been set by the opposition Syriza party for today in Athens. “This is a premeditated crime against Greek society,” Alexis Tsipras, the head of Syriza said in an e-mailed statement. “The majority of the Greek people are being tossed helplessly in the tempest of insecurity, unemployment and poverty.” He called for a referendum on the decision to seek IMF support. Papandreou, who announced today he will trigger the rescue is under fire from voters and unions for raising taxes and cutting wages to reduce a budget deficit that is more than four times bigger than European Union rules allow. Greeks fear the EU and IMF package, crafted to stem the country’s soaring borrowing costs, will mean lower pensions and benefits, more wage cuts and produce a deeper recession. Taxes, Wages The premier won elections in October promising to raise wages of public workers and step up stimulus spending. Within weeks of coming to power, the new administration discovered they faced a 2009 budget deficit of 12.7 percent of gross domestic product, more than twice the shortfall the defeated New Democracy government had revealed. EU officials revised the deficit further to 13.6 percent of GDP yesterday. The shortfall derailed Papandreou’s spending plans and forced him to raise taxes and cut wages to try to make good on a pledge to cut the shortfall to 8.7 percent this year. Investors shunned Greek bonds leaving the government struggling to finance its debt. Papandreou’s popularity has declined, particularly among the public workers who suffered the pay cuts and are the traditional base of his socialist party. “Papandreou needs to persuade the population that Greece must take ownership of the adjustment program,” said Marco Annunziata , chief economist for UniCredit Group in London. “They are not a punishment arbitrarily inflicted by the IMF or by the markets.” Hungary Precedent In Hungary, the first European Union member to turn to the IMF, voters this month ousted the ruling Socialist party two years after they accepted an IMF bailout after the global credit crisis choked investments. Fiscal conditions attached to the $27 billion loan exacerbated the country’s recession as unemployment soared to a record, souring support for the government. A full dispersal of funds may have to wait as German Chancellor Angela Merkel tries to win a regional election in North Rhine-Westphalia next month in the face of voter opposition to any Greek bailout. Merkel said today that Greece must satisfy “very stringent conditions” if it’s to get the funds. Activating the rescue mechanism and turning over economic policy to EU and IMF oversight is “a new Odyssey for Greece,” Papandreou said. “But we know the road to Ithaca and have charted the waters,” he said, referring to the return of mythological hero Ulysses to his island home after a decade. Confidence in Papandreou’s handling of the economy dropped this month on deepening fears of new austerity measures. The share of people trusting his management of the crisis fell to 47 percent from 55 percent in February, according to a survey of 540 Greeks by Public Issue for Skai radio . Greek Harm? Ninety-one percent of those surveyed said they expect a wave of new fiscal measures from the IMF, around the same proportion as in an April 18 poll for Eleftheros Typos newspaper. The poll showed 51 percent believe the IMF will harm the country, compared with 27 percent who said it would be of benefit. ADEDY has held four 24-hour national walkouts so far this year. GSEE, the umbrella group representing 2 million private- sector workers will meet next week to decide “how and when” to strike, spokesman Stathis Anestis said. “Papandreou spoke of a new Odyssey: heaven only knows how long that will be,” Antonis Samaras , the leader of the main opposition party, the center-right New Democracy which was defeated by Papandreou’s socialist Pasok party in October. Samaras said that while he had taken responsibility for the previous government’s failures in some policies “the borrowing crisis is exclusively the achievement of Pasok.” To contact the reporter on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net

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Papandreou Faces Bond Rout as Budget Deficit Worsens, Greek Workers Strike

April 22, 2010

By Maria Petrakis April 22 (Bloomberg) — Greek bond yields surged to the highest since 1998 as the country’s worsening budget outlook put pressure on the government to accept a European Union bailout and ignore street protests against its austerity measures. Greece’s benchmark 10-year bond yield rose to 8.564 percent, the highest since 1998 and more than twice the rate on bunds. As a civil servant strike closed hospitals and shut the 2,500-year-old Parthenon temple, the EU said today that Greece’s deficit in 2009 was worse than previously forecast. EU officials lifted their estimate to 13.6 percent of gross domestic product from 12.7 percent and said it could top 14 percent. Prime Minister George Papandreou is under fire from voters who say his budget cuts have gone too far and from investors who argue that further action is needed to reduce a deficit that is four times bigger than European Union rules allow. As Greek lawmakers meet EU and International Monetary Fund officials to negotiate loan conditions, the premium investors demand to hold Greek debt over German bonds reached 522 basis points. “Papandreou is caught between a rock and a hard place,” said Jacques Cailloux , chief European Economist at Royal Bank of Scotland Group Plc. “The market has zero confidence in what the Greeks are saying, and any further austerity measures pushed for by the IMF could be the ones that break the camel’s back if they are deemed unfair by the population. He doesn’t have any option though.” Markets Suffer The Greek government said it still plans to cut the deficit by 4 percentage points this year, though it backed away from a forecast that the shortfall would fall to 8.7 percent. An EU official said the bloc has always aimed for a 4 percentage point cut in the budget gap this year. Greek stocks declined for a second day today with the benchmark ASE Index falling 2.4 percent to 1,890.21, leaving it down 14 percent on the year. Greece’s two-year bonds now yield more than the 10-year debt, indicating investors don’t believe the EU bailout plan will be enough to sustain Greece. Credit- default swaps to insure against a default in the coming year leaped 104 basis points to a record 744.7. More than 500,000 workers were called on to strike, according to the unions organizing the walkout. Today’s strike isn’t expected to affect public transport or plane travel, after air-traffic controllers postponed a planned walkout to clear a backlog of flights caused by the spread of volcanic ash from Iceland across Europe. Embracing IMF Greek officials yesterday began talks on activating a 45 billion-euro ($60 billion) emergency aid package, with 9 out of 10 people surveyed in an opinion poll in Eleftheros Typos expecting the IMF to insist on more belt-tightening measures. The main opposition party, the center-right New Democracy, said Papandreou is responsible for driving the country into the IMF’s arms. Dimitris Papadimoulis, a lawmaker for the Syriza left coalition group, said in parliament yesterday the IMF’s involvement hangs “like a cloud of volcanic ash over Greeks.” “They feel that for years now the prime minister will be Dominique Strauss-Kahn ,” he said, referring to the IMF’s managing director. The IMF is likely to try to impose tougher conditions than the deficit-reduction measures devised by the Papandreou government. Serious resistance to IMF demands could endanger future loans, said Erik F. Nielsen , chief European economist at Goldman Sachs in London. Debt Restructuring “If this becomes a major issue, then I suspect that the IMF might settle for a smaller and shorter program to help them through the May payments, but for investors this ought to be a major concern,” he wrote in an e-mail to investors. Nielsen said the government might even be forced to offer a voluntary debt-restructuring arrangement sometime over the next few months in combination with the aid package. Some European officials say that national strikes highlight the challenge facing the Greek government in coming years. In a briefing to German lawmakers on April 19, Bundesbank President Axel Weber cited television footage of Greek demonstrators as showing how sections of the population fail to appreciate the situation their debt-laden country is in. His comments were cited by two lawmakers who were present. PAME Hellas, a union affiliated with the Greek Communist Party, called its own labor action. Its members blockaded entry to the port of Piraeus yesterday, preventing ferries from sailing. Others picketed luxury hotels in the city center, including at least one where IMF negotiators are staying. Slaughter “We must dare, otherwise we will be led like lambs to the slaughter,” said Aleka Papariga, head of the Communist Party of Greece, the third-largest parliamentary party. “Working people aren’t about to be used to allow passage of policies that will bring the worst barbarity we’ve seen in the past 35 years.” Papandreou’s government still needs to raise about 8.5 billion euros before the end of May. While Finance Minister George Papaconstantinou says he’s “not influenced” by the surge in bond yields, investors are skeptical he can maintain momentum to cut the budget shortfall to less than 3 percent in 2012. The EU today said the 2009 deficit could be revised as much as 0.5 percentage point higher because of “uncertainties on the surplus of social security funds for 2009, on the classification of some public entities and on the recording of off-market swaps.” The yield on Greece’s 10-year government bond has surged more than 100 basis points since April 12, the first day of trading after the EU said it was prepared to offer Greece loans for three years at 5 percent. The spread on German bunds is the highest since the euro was started in 1999. “Greek policymakers are steering an extremely perilous course between investors asking for a quick and tough IMF program, and public opinion opposed to further adjustment,” said Marco Annunziata , chief economist at UniCredit Group in London. “It’s an almost impossible task, especially with time quickly running out.” To contact the reporter on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net

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Papandreou Caught Between Strikes and IMF as Bond Yields Surge to Record

April 21, 2010

By Maria Petrakis April 22 (Bloomberg) — Greek civil servants will strike today in their fourth national walkout this year as surging bond yields put pressure on the government to activate a European Union bailout and accept more spending cuts. The strike will shutter hospital and schools and also affect ministries and government offices, according to an e- mailed statement from Athens-based ADEDY, the umbrella group for more than 500,000 state workers. It will hold a rally in central Athens at 11 a.m. local time. Greek Prime Minister George Papandreou is under fire from voters who say his austerity measures have gone too far and from investors who argue that further action is needed to cut the EU’s largest budget deficit. As Greece meets EU and International Monetary Fund officials to agree on the conditions tied to any loan, the extra yield investors demand to hold Greek debt over German bonds has surged to a record 522 basis points. “Papandreou is caught between a rock and a hard place,” said Jacques Cailloux , chief European Economist at Royal Bank of Scotland Group Plc. “The market has zero confidence in what the Greeks are saying, and any further austerity measures pushed for by the IMF could be the ones that break the camel’s back if they are deemed unfair by the population. He doesn’t have any option though.” Today’s strike isn’t expected to affect public transport or air traffic, after air-traffic controllers postponed a planned walkout to clear a backlog of flights caused by the spread of volcanic ash from Iceland across Europe. Belt-Tightening Greek officials yesterday began talks on activating a 45 billion-euro ($60 billion) emergency aid package, with 9 out of 10 people surveyed in an opinion poll in Eleftheros Typos expecting the IMF to insist on more belt-tightening measures. The main opposition party, the center-right New Democracy, said Papandreou is responsible for driving the country into the IMF’s arms. Dimitris Papadimoulis, a lawmaker for the Syriza left coalition group, said in parliament yesterday the IMF’s involvement hangs “like a cloud of volcanic ash over Greeks.” “They feel that for years now the prime minister will be Dominique Strauss-Kahn ,” he said, referring to the IMF’s managing director. Some European officials say that national strikes highlight the challenge facing the Greek government in coming years. In a briefing to German lawmakers on April 19, Bundesbank President Axel Weber cited television footage of Greek demonstrators as showing how sections of the population fail to appreciate the situation their debt-laden country is in. His comments were cited by two lawmakers who were present. Slaughter PAME Hellas, a union affiliated with the Greek Communist Party, called its own labor action. Members of the group blockaded entry to the port of Piraeus yesterday, preventing ferries from sailing. Others picketed luxury hotels in the city center, including at least one where IMF negotiators are staying. “We must dare, otherwise we will be led like lambs to the slaughter,” said Aleka Papariga, head of the Communist Party of Greece, the third-largest parliamentary party. “The working people aren’t about to be used to allow passage of policies that will bring the worst barbarity we’ve seen in the past 35 years.” Bond Redemption As voters protest, Papandreou’s government still needs to raise about 8.5 billion euros before the end of May. While Finance Minister George Papaconstantinou says he’s “not influenced” by the surge in bond yields, investors are skeptical he can maintain momentum to cut the budget shortfall from 12.9 percent of gross domestic product last year to less than 3 percent in 2012. The yield on Greece’s 10-year government bond has surged 139 basis points to 8.19 percent since April 12, the first day of trading after the EU said it was prepared to offer Greece loans for three years at 5 percent. “Greek policymakers are steering an extremely perilous course between investors asking for a quick and tough IMF program, and public opinion opposed to further adjustment,” said Marco Annunziata , chief economist at UniCredit Group in London. “It’s an almost impossible task, especially with time quickly running out.” To contact the reporter on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net

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Greece Paralyzed by Strikes as Unions Protest Against Plan to Cut Deficit

March 11, 2010

By Maria Petrakis and Natalie Weeks March 11 (Bloomberg) — Greece’s hospitals, airports and schools were shut today as unions stage the second general strike this year to protest Prime Minister George Papandreou ’s latest budget cuts to curb the European Union’s biggest deficit. An air-traffic controllers’ walkout forced the cancellation of flights, including 479 from Athens International Airport , the country’s largest. Bus and subway drivers, doctors, power workers, journalists and teachers are also protesting 4.8 billion euros ($6.5 billion) of wage cuts and tax increases. “The measures taken so far are unjust, demanding sacrifices from workers that aren’t being demanded from the employers, businessmen and bankers that created this crisis,” said Stathis Anestis, spokesman for the GSEE union, which represents 2 million workers in the private sector. The government’s latest budget cuts, the third package of measures this year, has triggered a new wave of protests in Greece, while being praised by EU officials and rewarded by investors. The risk premium investors demand to buy Greece debt over comparable German bonds has narrowed from an 11-year high on Jan. 28 and Greece was able to sell 5 billion euros of bonds to finance a day after announcing the package. Storming Parliament The Athens benchmark general index has gained 6 percent since the measures were announced on March 3, outperforming other western European benchmarks. Greek workers are anything but supportive. On March 5, striking workers shut down transport and tried to storm parliament as lawmakers passed the new budget cuts that Finance Minister George Papaconstantinou said will show EU allies and investors that Greece is making good on its deficit pledges. “The main risk is not that adjustment in Greece is not feasible, but that Greek society will refuse to shoulder the inevitable near-term economic pain,” Deutsche Bank analysts including Thomas Mayer , wrote in a research note. The tax increases and wage cuts are likely to be a further drag on growth this year, complicating the government’s efforts to reduce the deficit as percent of gross domestic product. Deutsche Bank forecasts a contraction of 4 percent in 2010, twice last year’s pace. The Finance Ministry yesterday said the forecast for a 0.3 percent contraction included in the January deficit-reduction plan, is too optimistic and now sees the economy shrinking at least 0.8 percent this year. Greece will announce final fourth-quarter GDP today after a preliminary report on Feb. 12 showed the economy contracted 2.6 percent in the three months through December from a year earlier. EU Pressure Investors and EU officials have ratcheted up pressure on Greece to do more to ensure it meets its deficit target of 8.7 percent of gross domestic product this year, from 12.7 percent in 2009, as the country sinks deeper into recession. Concerns about Greece’s ability to tame the budget gap prompted speculation that the country would need a bailout and could be forced to abandon the single currency. The euro has declined almost 5 percent this year as Greece’s financial woes raised questions about the strength of monetary union. Eurobank and National Bank of Greece SA may report their lowest quarterly profit in at least five years as loan losses mount during the economic slump. Eurobank, the country’s second- largest lender, may say today that fourth-quarter net income fell to 3.7 million euros, according to the average of six analysts surveyed by Bloomberg. Popularity Sliding Papandreou’s approval rating slipped more than 10 percentage points over the last two months as he unveiled the raft of budget measures, a poll showed on March 9. He still commands the support of a majority of Greeks, with 52 percent having a positive opinion of him, according to the survey by GPO pollsters for Mega Television. Almost 60 percent of those surveyed disapproved of the latest budget cuts and more than 65 percent said the measures were “unfair.” In a Kapa Research poll for To Vima newspaper on March 7, which also showed Papandreou with majority support, 86.9 percent said the measures would provoke social unrest. His socialist Pasok Party enjoys a 10-seat majority in parliament and was able to pass the latest budget measures in the legislature on March 5, two days after announcing the plan. “The protests, unrest and violence all this time are instigated by those who are attempting to preserve for their own benefit all the ills that resulted in the Greek people being beggars to international markets,” Dimitris Daskalopoulos , head of the Athens-based Federation of Greek industries, said in a speech yesterday. “Who are they calling on us to protest against and demand from? Is it maybe against ourselves?” To contact the reporter on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net ;

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Greeks Brace for Protests, National Strike Over Papandreou’s Budget Cuts

March 11, 2010

By Maria Petrakis and Natalie Weeks March 11 (Bloomberg) — Greece’s unions will shut down hospitals, airports and schools today in the country’s second general strike this year to protest Prime Minister George Papandreou ’s latest round of budget cuts to curb the European Union’s biggest deficit . An air-traffic controllers’ walkout will force the cancellation of flights, including 479 from Athens International Airport , the country’s largest. Bus and subway drivers, doctors, power workers, journalists and teachers will stop work to protest 4.8 billion euros ($6.5 billion) of wage cuts and tax increases that have been praised by investors and the European Union. Policemen and firemen will don their uniforms to join a march to parliament. “The measures taken so far are unjust, demanding sacrifices from workers that aren’t being demanded from the employers, businessmen and bankers that created this crisis,” said Stathis Anestis, spokesman for the GSEE union, which represents 2 million workers in the private sector. Today’s 24-hour strike is the latest protest against the government since the announcement of a third package of budget measures last week. On March 5, striking workers shut down transport and tried to storm parliament as lawmakers passed the cuts that Finance Minister George Papaconstantinou said will show EU allies and investors that Greece is making good on its deficit pledges. Road Show Papandreou returns to Athens today after visits to Germany, France and the U.S. to underline the government’s efforts to trim the deficit and drum up support for his call to regulate derivatives. He says the securities have deepened the Greek fiscal crisis, driving up borrowing costs for the country. Investors and EU officials have ratcheted up pressure on Greece to do more to ensure it meets its deficit target of 8.7 percent of gross domestic product this year, from 12.7 percent in 2009, as the country sinks deeper into recession. Greece will announce final fourth-quarter GDP today after a preliminary report on Feb. 12 showed the economy contracted 2.6 percent in the three months through December from a year earlier. The Athens benchmark general index has gained 6 percent since the latest measures were announced on March 3, outperforming other western European benchmarks. Bonds have rallied. The yield on the new Greek 10-year benchmark due June 2020 fell 5 basis points yesterday to 6.25 percent, according to EFG Eurobank Ergasias SA prices. The two-year note yield fell 11 basis points to 4.76 percent. Euro Suffers Concerns about Greece’s ability to tame the budget gap prompted speculation that the country would need a bailout and could be forced to abandon the single currency. The euro has declined almost 5 percent this year as Greece’s financial woes raised questions about the strength of monetary union. Greece on Feb. 12 revised down its GDP data for the first three quarters of 2009, with the economy shrinking 2 percent last year compared with a government forecast of a 1.2 percent contraction. Economists say that the tax increases and wage cuts, while necessary, are likely to be a further drag on growth this year, echoing arguments from the labor unions. The Finance Ministry said yesterday that the economy may contract more than 0.8 percent this year, compared with a 0.3 percent contraction forecast in the January deficit plan. Bank Earnings Eurobank and National Bank of Greece SA may report their lowest quarterly profit in at least five years as loan losses mount during the economic slump. Eurobank, the country’s second- largest lender, may say today that fourth-quarter net income fell to 3.7 million euros, according to the average of six analysts surveyed by Bloomberg. Papandreou’s approval rating slipped more than 10 percentage points over the last two months as he unveiled the raft of budget measures, a poll showed on March 9. He still commands the support of a majority of Greeks, with 52 percent having a positive opinion of him, according to the survey by GPO pollsters for Mega Television. Almost 60 percent of those surveyed disapproved of the latest budget cuts and more than 65 percent said the measures were “unfair.” In a Kapa Research poll for To Vima newspaper on March 7, which also showed Papandreou with majority support, 86.9 percent said the measures would provoke social unrest. “The protests, unrest and violence all this time are instigated by those who are attempting to preserve for their own benefit all the ills that resulted in the Greek people being beggars to international markets,” Dimitris Daskalopoulos , head of the Athens-based Federation of Greek industries said in a speech yesterday. “Who are they calling on us to protest against and demand from? Is it maybe against ourselves?” To contact the reporter on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net ;

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Greeks Back Papandreou Even After $6.5 Billion in Budget Cuts, Poll Shows

March 7, 2010

By Maria Petrakis March 7 (Bloomberg) — A majority of Greeks back Prime Minister George Papandreou even after he announced 4.8 billion euros ($6.5 billion) in new budget cuts, a poll showed. A total of 51.9 percent supported Papandreou, compared with 47.5 percent who didn’t, according to a survey of 1,044 people by Kapa Research published in To Vima newspaper today. The poll showed 47.9 percent of those questioned disagreed overall with the austerity moves, while 46.6 percent approved of it. The measures include cuts in vacation leave and bonuses for civil servants as well as tax increases. Papandreou’s third package of cuts and tax increases has prompted walkouts by labor unions and drawn praise from European Union officials. It includes a 30 percent reduction in bonus- salary payments to civil servants, a 7 percent overall decrease in wages at wider public-sector companies and an increase in the main value-added tax rate to 21 percent from 19 percent. Greek bonds have gained. A total of 86.9 percent said the measures would provoke social unrest, the poll showed. Asked if they would vote to leave the euro zone and return to using the drachma, 63 percent said they wouldn’t. The survey was conducted on March 4, the day after the government announced the new deficit cuts. The margin of error is three percentage points. To contact the reporter on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net

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Greek Workers Occupy Finance Ministry, Block Streets in Challenge to Cuts

March 4, 2010

By Maria Petrakis March 4 (Bloomberg) — Greek demonstrators took over the Finance Ministry building in central Athens and blocked streets in the city center as union groups stepped up protests against government wage cuts and tax increases to curb the deficit. About 200 members of the PAME union group, aligned with the Communist Party of Greece, were at the ministry today and protesters also took over the nearby General Accounting Office, according to a police spokeswoman. Another group blocked a central road in downtown Athens, snarling traffic. Greek Prime Minister George Papandreou yesterday unveiled 4.8 billion euros ($6.6 billion) of additional deficit cuts as he tries to convince European allies and investors he can tame the region’s biggest budget gap. European Union officials praised the moves and Greek bonds gained on the measures, which include a 30 percent cut to three bonus-salary payments to civil servants. “The measures are grossly unfair,” Dimitris Bratis, the president of the Greek teaching federation , which will strike for 24 hours tomorrow, told NET TV today. “We’re being asked to pay for the crisis. Greek taxpayers are being asked to foot the bill again.” The main union for public workers, ADEDY, called a three- hour work stoppage for tomorrow and a protest rally in the city center, that the country’s private-section union group, representing 2 million Greek workers , will also join, according to spokesman Stathis Anestis. ‘Rise Up’ The Finance Ministry building was draped with a banner urging Greeks to “rise up” against the budget measures and protesters on the roof of the building exhorted passersby to join a protest march by PAME scheduled for later today. Last week, the same group blockaded the Athens stock exchange headquarters, preventing staff from entering the building. ADEDY said it is considering rescheduling its March 16 24- hour strike, the third this year, to next week. GSEE’s executive met today to decide on new strike and protests. Papandreou’s package announced yesterday includes cuts in spending for education and an increase in value-added taxes, as well as to the bonuses paid to civil servants for holidays and a pension freeze. The package of measures is due to be voted on tomorrow in parliament, where Papandreou has a 10-seat majority. The GSEVEE federation, which represents small businesses and craftsmen, said the measures were “neither fair, nor effective.” “The attempt to fix the fiscal crisis underlines clearly the government’s attempt to move the cost of this attempt to the real economy,” Nikos Skorinis, the secretary of GSEVEE said in an e-mailed statement. To contact the reporters on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net

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Greece Passes $6.6 Billion More Deficit Cuts to Avert Fiscal `Catastrophe’

March 3, 2010

By Maria Petrakis and Natalie Weeks March 3 (Bloomberg) — Greek Prime Minister George Papandreou said his government is discovering “new holes” in the budget on a daily basis as it prepares to announce as much as 4.8 billion euros ($6.5 billion) in extra deficit cuts. Bowing to pressure from the European Union and investors to do more to tame the EU’s biggest budget gap, the steps to be unveiled today will include higher tobacco, alcohol and sales taxes and steeper reductions in public workers’ bonus payments, said a person familiar with the matter, who declined to be identified because the details aren’t yet public. Greece is signing up to even greater austerity measures two days before Papandreou meets Germany’s Angela Merkel, and the effort may help the chancellor justify aiding Greece to her taxpayers and political allies who say the country shouldn’t be bailed out after years of excess. Greek bonds advanced for a third day yesterday on the prospect that the deficit measures might ease the way for EU assistance. “We need the support of our partners,” Papandreou told his Pasok party in Athens yesterday. “To provide it they must convince their citizens, from whom they are also asking for sacrifices, that Greece is doing what must be done.” Bonds Gain Greek bonds gained for a fourth day today, with the yield on the benchmark 10-year bond falling 12 basis point to 6.03 percent, the lowest since Feb. 11. The premium investors demand to buy Greek government debt over comparable German bonds, the European benchmark, fell 11 basis points to 2.93 percent. Concern about Greece’s ability to finance its debt pushed that premium to 396 basis points on Jan. 28, the highest since the start of the euro in 1999, making it more expensive for the country to sell new bonds. “If our country doesn’t manage to borrow with similar terms as is normal for a European Union country, then the consequences will be something more than catastrophic,” Papandreou said. “Our responsibility is to avoid this catastrophe.” In its original deficit-reduction plan presented to the European Commission on Jan. 15, the Greek government pledged to cut a deficit of 12.7 percent of gross domestic product to 8.7 percent this year. The EU has been pressuring Greece to adopt additional measures as a condition of possible aid partly because the original plan relied heavily on raising revenue rather than cutting spending to achieve the goal. Budget ‘Landmines’ The additional measures are also needed because every day “we discover new holes, new debts, new landmines in the Greek state’s budget,” Papandreou said, blaming the previous New Democracy government, which he defeated in October elections, for much of the country’s fiscal mess. Tensions between the two parties could complicate Papandreou’s ability to pass some of the austerity measures in parliament. Antonis Samaras , leader of New Democracy party, called Papandreou’s remarks “arrogant” and said, “shortly before he announces new austerity measures and visits important foreign leaders, he decided to demolish the domestic front, to acquit Pasok forever and to slander New Democracy for everything.” Papandreou acknowledged the measures will be “painful” and that raising taxes might hurt economic growth, though the “primary threat is not the recession, but something worse: finding ourselves unable to borrow,” he said. Strikes, Protests In a sign he will face domestic opposition, the main union for public workers announced plans for its third 24-hour strike of the year on March 16 to protest the austerity measures. Still, given the size of the public wage bill, civil servants may be forced to bear the brunt of the cuts. Retirees were also marching on the Finance Ministry in Athens today to protest planned changes to reduce the cost of the pension system. “When it comes to reducing primary expenditure, compensation of government employees represents an important area of potential savings,” Tullia Bucco , an economist at UniCredit Global Research wrote in a note to investors today. Compensation for civil servants reached 12 percent of GDP in 2008, up from 10 percent in 2000 and 2 percentage points more than the euro-zone average, she wrote. German lawmakers say euro-area officials are devising a plan to grant Greece about 25 billion euros in aid should the need arise. One option could involve using German state-owned lenders such as the KfW Group to buy its bonds . That would be enough to cover more than 20 billion euros of debt redemptions in April and May. Merkel Matters “The meeting with Mrs. Merkel is the one that matters,” Willem Buiter , chief economist at Citigroup Inc. in London, told Bloomberg Radio yesterday. “The Germans will have to come up with money. In order to do that they will have to be satisfied that sufficient additional fiscal pain has been inflicted on Greece.” Greece had planned to sell 5 billion euros of bonds as soon as this week. The country is under no pressure to sell more debt and will do so when market conditions are “favorable,” Petros Christodoulou , head of the country’s debt management agency, said in an interview yesterday. To contact the reporters on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net ; Natalie Weeks in Athens nweeks2@bloomberg.net .

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Greece Said to Prepare $6.5 Billion of Deficit Cuts, Bowing to EU Pressure

March 2, 2010

By Maria Petrakis March 2 (Bloomberg) — The Greek government will announce as much as 4.8 billion euros ($6.5 billion) of additional deficit cuts tomorrow, bowing to pressure from the European Union and investors to do more to tame the region’s biggest shortfall, a person familiar with the plan said. The new measures will include higher, tobacco, alcohol and sales taxes and deeper cuts in public workers’ bonus payments, said the person, who declined to be identified because the details aren’t public. Greek bonds advanced for a third day today on the prospect that the deficit measures might ease opposition to EU aid for Greece. EU Monetary Affairs Commissioner Olli Rehn said yesterday that Greece must reveal new measures “in the coming days” to allay officials’ concerns that the current austerity plan falls short. The announcement would come two days before Prime Minister George Papandreou meets Germany’s Angela Merkel and may help the chancellor justify aiding Greece to taxpayers and political opponents who say the country shouldn’t be bailed out after living beyond its means. The yield on the benchmark 10-year bond fell 7 basis points today to 6.18 percent, the lowest since Feb. 12. The premium investors demand to buy Greek government debt over comparable German bonds, the European benchmark, fell 15 basis points to 3.01 percent, the least in three weeks. Rising Risk Concern about Greece’s ability to finance its debt pushed that premium to 396 basis points on Jan. 28, the highest since the start of the euro in 1999, making it more expensive for the country to sell new bonds. German lawmakers say euro-area officials are devising a plan to grant Greece about 25 billion euros in aid should the need arise. One option could involve using German state-owned lenders such as the KfW Group to buy its bonds . That would be enough to cover more than 20 billion euros of debt redemptions in April and May. Greece had planned to sell 5 billion-euros of bonds as soon as this week. Greece is under no pressure to sell more debt and will do so when market conditions are “favorable,” Petros Christodoulou , head of the country’s debt management Agency, said in an interview today. In its original deficit reduction plan presented to the European Commission on Jan. 15, the government pledged to cut a deficit of 12.7 percent of gross domestic product to 8.7 percent this year. The new measures, the second set of additional actions announced by Greece since the original plan was presented, are the equivalent of as much as 2 percentage points of GDP. To contact the reporters on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net

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Greek Unions Stage Second Strike This Month Over Government’s Budget Cuts

February 24, 2010

By Maria Petrakis Feb. 24 (Bloomberg) — Greece’s unions plan to shut down transportation, medical and educational facilities today in a second 24-hour strike aimed at resisting Prime Minister George Papandreou ’s drive to cut the European Union’s biggest budget deficit. Air-traffic controllers, customs and tax officials, bus and train drivers, doctors at state-run hospitals and school teachers are walking off the job for a one-day strike to protest government spending cuts that will freeze salaries and hiring and cut bonuses. Journalists are also joining the strike, creating a media blackout. “People on the street will send a strong message to the government but mainly to the European Union , the markets and our partners in Europe that people and their needs must be above the demands of markets,” Yiannis Panagopoulos, president of the private-sector union GSEE , told NET TV yesterday. “We didn’t create the crisis.” Half a million civil servants already held a 24-hour strike on Feb. 10. Today they’re joining forces with GSEE , which represents 2 million workers, after EU warnings that Papandreou’s government needs to bring in new taxes and make more spending cuts if it fails to rein in the largest budget gap of all 27 EU member states. Greek bonds have slumped, driving up borrowing costs, as investors fear that government plans outlined so far will fail to reduce the gap this year to 8.7 percent of GDP from 12.7 percent. Papandreou’s government needs to sell 53 billion euros ($72 billion) of debt this year, the equivalent of 20 percent of gross domestic product. Bailout Concern Greece’s fiscal woes have stoked concerns that it may need a bailout and helped spark a rout in global stocks . The premium that investors demand to buy Greek debt over comparable German bonds ballooned on Jan. 28 to the highest since 1998 amid worries that Papandreou’s deficit plan relied too much on one- off measures for revenue and not enough on expenditure cuts. “We haven’t yet seen anything of the fiscal contraction that Greece has to go through if it wants to avoid a sovereign default,” Fredrik Erixon , director of the Brussels-based European Centre for International Political Economy, said in a phone interview. Almost 500 international and domestic flights have been canceled today, a spokeswoman for Athens International Airport , Greece’s biggest, said by telephone. The Athens Metro, which carries 650,000 commuters to work each morning, won’t run nor will the capital’s trolleys and trams. Urban buses will operate only until 7:30 a.m. and after 10 p.m. Passenger ferries and other vessels will remain docked until the end of the strike. Protest Marches Rallies and protest marches are planned in Athens and other cities and towns. Yesterday, the PAME union group, aligned to the Communist Party of Greece, blockaded the Athens stock exchange headquarters, preventing staff from entering the building. The Athens benchmark general index fell 1.8 percent to 1,922.69 yesterday, bringing losses so far this year to 12 percent, the second-worst performance in western Europe. Greek government bonds extended their decline after Fitch Rating downgraded the country’s four largest banks, pushing the yield on the 10-year bond up 7 basis points to 6.49 percent at 6 p.m. in London. Ratings companies, which cut the country’s grades in December after Papandreou revealed the country’s budget shortfall was more than four times the EU limit, have warned the government’s three-year budget plan must be implemented to the letter. Slash Spending EU governments are looking for guarantees that Papandreou, elected in October, will slash spending before they spell out what help they may offer. Under proposals adopted by finance ministers from the 16 nations that share the euro, the Greek government will have to take additional measures to cut its deficit if it fails to satisfy the European Commission next month. These may include higher value-added tax, a levy on luxury goods, higher energy taxes and spending cuts, they said. German Chancellor Angela Merkel , in a speech in Hamburg on Feb. 22, said a solution to the Greek crisis is the “core element” in re-establishing confidence in the single currency. “The mistakes have to be dealt with at their roots,” Merkel said. “In the case of Greece, we need to do everything to support the Greek government, which of course has taken this path, in formulating a true consolidation program.” Greek Finance Minister George Papaconstantinou has resisted calls for deeper spending cuts and said Feb. 16 the government was “ahead of the target” set out in its deficit-reduction plan. Most Greeks support the measures outlined so far, which include an increase in the retirement age and a freeze on increases for public-sector workers, according to opinion polls. “New measures may be needed,” said George Mikonyiatis, 42, who has watched civil servants protesting cuts in their income rally outside the Finance Ministry for weeks from his camera shop in central Athens. “They need to be just. If you can prove the measures are just then the strikes won’t have mass support. They need to be targeted at those who aren’t paying their way.” To contact the reporters on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net ;

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Greek Deficit Plan Wins EU Backing as Papandreou Deepens Cuts in Spending

February 3, 2010

By Maria Petrakis and Meera Louis Feb. 3 (Bloomberg) — Greece’s plan to cut the European Union’s biggest budget deficit won European Commission backing after the government announced more measures to reduce the shortfall and try to quell investor concern that the nation may need a bailout. “We are endorsing the Greek program; we are giving confidence and supporting the Greek authorities,” EU Economic and Monetary Affairs Commissioner Joaquin Almunia told reporters in Brussels today. “The implementation of this program is not easy.” The Brussels-based commission, the EU executive, said it will demand monthly updates from Greece on its progress in completing the plan to reduce a deficit of 12.7 percent of gross domestic product to within the EU’s 3 percent limit in 2012. Greek Prime Minister George Papandreou yesterday announced a fuel-tax increase and said he would broaden a planned partial wage freeze to cover all public workers. The risk premium on Greek bonds rose to an 11-year high last week on concern over the government’s ability to sell the 53 billion euros ($74 billion) of bonds needed this year to finance its deficit and debt. Spanish and Portuguese bonds have also suffered as other high-deficit EU nations came under investor scrutiny, fueling speculation about the possibility of an EU bailout to protect the monetary union. ‘Speculative Game’ “Greece is in the center of a speculative game aimed at the euro,” Papandreou said in a televised speech in Athens late yesterday. “It is our national duty to stop the attempts to push our country to the edge of the cliff.” Greek bonds gained today, with the premium investors demand to buy 10-year Greek securities over comparable German debt, the EU benchmark, sliding 21 basis points to 333. That was down from a peak of 396 on Jan. 28. Papandreou yesterday urged Greeks to support the new measures and said the country couldn’t afford strikes and blockades that may derail the attempt to get the economy back on track. After the announcement of the broader wage freeze, unions urged workers to attend a previously announced strike of civil servants on Feb. 10. Greece’s original deficit plan pledges to cut spending and raise revenue by about 10 billion euros this year to trim the shortfall by 4 percent of GDP. The government said it would meet that goal through cuts in bonuses to civil servants, a crackdown on tax evasion and state-asset sales. The additional measures announced yesterday would reduce spending by 0.3 percent to 0.4 percent of GDP, economists at HSBC Holdings Plc estimate. Monitoring Greece In its statement today, the commission demanded more details on the new measures within a month. “The commission will be in charge of monitoring the implementation of the program through a very intense surveillance,” commission President Jose Barroso said yesterday. “The successful correction of its very excessive deficit is not only important for Greece, but for the euro area and the EU as a whole.” The additional spending cuts and higher taxes may put a further drag on an economy set to contract 0.3 percent in 2010. “Unless the wage-freeze measure is accompanied by initiatives that would boost exports and investments in the economy, the contraction in 2010 should be greater than expected, thus negatively affecting tax revenues,” economists at Marfin Analysis in Athens said in a note to investors today. Worst Performers The nation’s government bonds were the world’s worst performers in January, losing 6 percent in local currency terms and extending their decline over the past three months to more than 11 percent on concern about its deteriorating finances, Bloomberg/EFFAS indexes show. Greece’s financial woes have prompted some economists to question the future unity of the euro region and whether a single monetary policy can be applied simultaneously to 16 disparate economies. The euro has declined 7.1 percent against the dollar since the start on December. Economist Nouriel Roubini said in an interview today that the EU, the European Central Bank or the International Monetary Fund will probably offer financial aid to Greece to help the country avoid default and limit the damage to monetary union. “I expect there is going to be eventually some financial support,” Roubini told Bloomberg Television in Moscow. That support will come “either directly from the European Union or the ECB or, as I suggest, Greece should be going to the IMF to get an IMF package,” he said. Greek Debt The jump in Greece’s debt, which is set to surpass Italy as the region’s largest at more than 120 percent of GDP this year, has prompted investors to increase insurance against a possible default. Credit-default swaps on Greek government bonds reached a record high level of 422 basis points on Jan. 28. They fell 7 basis points today to 380, according to CMA DataVision prices. That means it costs $380,000 a year to insure against losses on the debt for five years. That perceived risk would decline further if the EU publicly offered to aid Greece and defend monetary union, said Nobel prize-winning economist Joseph Stiglitz . “If it made that announcement, then the speculators would know there’s no more hope and they would just go away,” Stiglitz, a Columbia University professor, said in an interview yesterday in Athens. “It would cost nobody.” Persuading Investors Portugal and Spain have also been struggling to convince investors that they can cut their deficits and finance rising debt. In announcing on Jan. 26 its own budget plan to bring the deficit back within the EU limit in 2013, Portugal said that its shortfall was 9.3 percent of GDP last year, higher than the commission’s November forecast of 8 percent. Spain, where the collapse of a real-estate boom deepened the recession and helped flip a budget surplus of 1.9 percent in 2007 into a deficit of 9.5 percent last year, also presented a budget plan calling for spending cuts and higher taxes. Cutting back on stimulus spending may make it harder for the government to reduce the EU’s highest jobless rate at almost 20 percent. The yield premium investors demand to hold Portuguese bonds instead of bunds increased 4 basis points today to 131 basis points, the highest since April. Spain’s spread with Germany fell 2 basis points to 83.7, down from a nine-month high of 98 on Jan. 28. To contact the reporters on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net ; Meera Louis in Brussels at mlouis1@bloomberg.net .

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Greek Deficit Plan Gains EU Backing After Papandreou Broadens Wage Freeze

February 3, 2010

By Maria Petrakis and Meera Louis Feb. 3 (Bloomberg) — Greece’s plan to cut the European Union’s biggest budget deficit won European Commission backing after the government announced more measures to reduce the shortfall and try to quell investor concern that the nation may need a bailout. “We are endorsing the Greek program; we are giving confidence and supporting the Greek authorities,” EU Economic and Monetary Affairs Commissioner Joaquin Almunia told reporters in Brussels today. “The implementation of this program is not easy.” The Brussels-based commission, the EU executive, said it will demand monthly updates from Greece on its progress in completing the plan to reduce a deficit of 12.7 percent of gross domestic product to within the EU’s 3 percent limit in 2012. Greek Prime Minister George Papandreou yesterday announced a fuel-tax increase and said he would broaden a planned partial wage freeze to cover all public workers. The risk premium on Greek bonds rose to an 11-year high last week on concern over the government’s ability to sell the 53 billion euros ($74 billion) of bonds needed this year to finance its deficit and debt. Spanish and Portuguese bonds have also suffered as other high-deficit EU nations came under investor scrutiny, fueling speculation about the possibility of an EU bailout to protect the monetary union. ‘Speculative Game’ “Greece is in the center of a speculative game aimed at the euro,” Papandreou said in a televised speech in Athens late yesterday. “It is our national duty to stop the attempts to push our country to the edge of the cliff.” Greek bonds gained today, with the premium investors demand to buy 10-year Greek securities over comparable German debt, the EU benchmark, sliding 21 basis points to 333. That was down from a peak of 396 on Jan. 28. Papandreou yesterday urged Greeks to support the new measures and said the country couldn’t afford strikes and blockades that may derail the attempt to get the economy back on track. After the announcement of the broader wage freeze, unions urged workers to attend a previously announced strike of civil servants on Feb. 10. Greece’s original deficit plan pledges to cut spending and raise revenue by about 10 billion euros this year to trim the shortfall by 4 percent of GDP. The government said it would meet that goal through cuts in bonuses to civil servants, a crackdown on tax evasion and state-asset sales. The additional measures announced yesterday would reduce spending by 0.3 percent to 0.4 percent of GDP, economists at HSBC Holdings Plc estimate. Monitoring Greece In its statement today, the commission demanded more details on the new measures within a month. “The commission will be in charge of monitoring the implementation of the program through a very intense surveillance,” commission President Jose Barroso said yesterday. “The successful correction of its very excessive deficit is not only important for Greece, but for the euro area and the EU as a whole.” The additional spending cuts and higher taxes may put a further drag on an economy set to contract 0.3 percent in 2010. “Unless the wage-freeze measure is accompanied by initiatives that would boost exports and investments in the economy, the contraction in 2010 should be greater than expected, thus negatively affecting tax revenues,” economists at Marfin Analysis in Athens said in a note to investors today. Worst Performers The nation’s government bonds were the world’s worst performers in January, losing 6 percent in local currency terms and extending their decline over the past three months to more than 11 percent on concern about its deteriorating finances, Bloomberg/EFFAS indexes show. Greece’s financial woes have prompted some economists to question the future unity of the euro region and whether a single monetary policy can be applied simultaneously to 16 disparate economies. The euro has declined 7.1 percent against the dollar since the start on December. Economist Nouriel Roubini said in an interview today that the EU, the European Central Bank or the International Monetary Fund will probably offer financial aid to Greece to help the country avoid default and limit the damage to monetary union. “I expect there is going to be eventually some financial support,” Roubini told Bloomberg Television in Moscow. That support will come “either directly from the European Union or the ECB or, as I suggest, Greece should be going to the IMF to get an IMF package,” he said. Greek Debt The jump in Greece’s debt, which is set to surpass Italy as the region’s largest at more than 120 percent of GDP this year, has prompted investors to increase insurance against a possible default. Credit-default swaps on Greek government bonds reached a record high level of 422 basis points on Jan. 28. They fell 7 basis points today to 380, according to CMA DataVision prices. That means it costs $380,000 a year to insure against losses on the debt for five years. That perceived risk would decline further if the EU publicly offered to aid Greece and defend monetary union, said Nobel prize-winning economist Joseph Stiglitz . “If it made that announcement, then the speculators would know there’s no more hope and they would just go away,” Stiglitz, a Columbia University professor, said in an interview yesterday in Athens. “It would cost nobody.” Persuading Investors Portugal and Spain have also been struggling to convince investors that they can cut their deficits and finance rising debt. In announcing on Jan. 26 its own budget plan to bring the deficit back within the EU limit in 2013, Portugal said that its shortfall was 9.3 percent of GDP last year, higher than the commission’s November forecast of 8 percent. Spain, where the collapse of a real-estate boom deepened the recession and helped flip a budget surplus of 1.9 percent in 2007 into a deficit of 9.5 percent last year, also presented a budget plan calling for spending cuts and higher taxes. Cutting back on stimulus spending may make it harder for the government to reduce the EU’s highest jobless rate at almost 20 percent. The yield premium investors demand to hold Portuguese bonds instead of bunds increased 4 basis points today to 131 basis points, the highest since April. Spain’s spread with Germany fell 2 basis points to 83.7, down from a nine-month high of 98 on Jan. 28. To contact the reporters on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net ; Meera Louis in Brussels at mlouis1@bloomberg.net .

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Greek Deficit Plan Gains EU Backing After Papandreou Broadens Wage Freeze

February 3, 2010

By Maria Petrakis and Meera Louis Feb. 3 (Bloomberg) — Greece’s plan to cut the European Union’s biggest budget deficit won European Commission backing after the government announced more measures to reduce the shortfall and try to quell investor concern that the nation may need a bailout. “We are endorsing the Greek program; we are giving confidence and supporting the Greek authorities,” EU Economic and Monetary Affairs Commissioner Joaquin Almunia told reporters in Brussels today. “The implementation of this program is not easy.” The Brussels-based commission, the EU executive, said it will demand monthly updates from Greece on its progress in completing the plan to reduce a deficit of 12.7 percent of gross domestic product to within the EU’s 3 percent limit in 2012. Greek Prime Minister George Papandreou yesterday announced a fuel-tax increase and said he would broaden a planned partial wage freeze to cover all public workers. The risk premium on Greek bonds rose to an 11-year high last week on concern over the government’s ability to sell the 53 billion euros ($74 billion) of bonds needed this year to finance its deficit and debt. Spanish and Portuguese bonds have also suffered as other high-deficit EU nations came under investor scrutiny, fueling speculation about the possibility of an EU bailout to protect the monetary union. ‘Speculative Game’ “Greece is in the center of a speculative game aimed at the euro,” Papandreou said in a televised speech in Athens late yesterday. “It is our national duty to stop the attempts to push our country to the edge of the cliff.” Greek bonds gained today, with the premium investors demand to buy 10-year Greek securities over comparable German debt, the EU benchmark, sliding 21 basis points to 333. That was down from a peak of 396 on Jan. 28. Papandreou yesterday urged Greeks to support the new measures and said the country couldn’t afford strikes and blockades that may derail the attempt to get the economy back on track. After the announcement of the broader wage freeze, unions urged workers to attend a previously announced strike of civil servants on Feb. 10. Greece’s original deficit plan pledges to cut spending and raise revenue by about 10 billion euros this year to trim the shortfall by 4 percent of GDP. The government said it would meet that goal through cuts in bonuses to civil servants, a crackdown on tax evasion and state-asset sales. The additional measures announced yesterday would reduce spending by 0.3 percent to 0.4 percent of GDP, economists at HSBC Holdings Plc estimate. Monitoring Greece In its statement today, the commission demanded more details on the new measures within a month. “The commission will be in charge of monitoring the implementation of the program through a very intense surveillance,” commission President Jose Barroso said yesterday. “The successful correction of its very excessive deficit is not only important for Greece, but for the euro area and the EU as a whole.” The additional spending cuts and higher taxes may put a further drag on an economy set to contract 0.3 percent in 2010. “Unless the wage-freeze measure is accompanied by initiatives that would boost exports and investments in the economy, the contraction in 2010 should be greater than expected, thus negatively affecting tax revenues,” economists at Marfin Analysis in Athens said in a note to investors today. Worst Performers The nation’s government bonds were the world’s worst performers in January, losing 6 percent in local currency terms and extending their decline over the past three months to more than 11 percent on concern about its deteriorating finances, Bloomberg/EFFAS indexes show. Greece’s financial woes have prompted some economists to question the future unity of the euro region and whether a single monetary policy can be applied simultaneously to 16 disparate economies. The euro has declined 7.1 percent against the dollar since the start on December. Economist Nouriel Roubini said in an interview today that the EU, the European Central Bank or the International Monetary Fund will probably offer financial aid to Greece to help the country avoid default and limit the damage to monetary union. “I expect there is going to be eventually some financial support,” Roubini told Bloomberg Television in Moscow. That support will come “either directly from the European Union or the ECB or, as I suggest, Greece should be going to the IMF to get an IMF package,” he said. Greek Debt The jump in Greece’s debt, which is set to surpass Italy as the region’s largest at more than 120 percent of GDP this year, has prompted investors to increase insurance against a possible default. Credit-default swaps on Greek government bonds reached a record high level of 422 basis points on Jan. 28. They fell 7 basis points today to 380, according to CMA DataVision prices. That means it costs $380,000 a year to insure against losses on the debt for five years. That perceived risk would decline further if the EU publicly offered to aid Greece and defend monetary union, said Nobel prize-winning economist Joseph Stiglitz . “If it made that announcement, then the speculators would know there’s no more hope and they would just go away,” Stiglitz, a Columbia University professor, said in an interview yesterday in Athens. “It would cost nobody.” Persuading Investors Portugal and Spain have also been struggling to convince investors that they can cut their deficits and finance rising debt. In announcing on Jan. 26 its own budget plan to bring the deficit back within the EU limit in 2013, Portugal said that its shortfall was 9.3 percent of GDP last year, higher than the commission’s November forecast of 8 percent. Spain, where the collapse of a real-estate boom deepened the recession and helped flip a budget surplus of 1.9 percent in 2007 into a deficit of 9.5 percent last year, also presented a budget plan calling for spending cuts and higher taxes. Cutting back on stimulus spending may make it harder for the government to reduce the EU’s highest jobless rate at almost 20 percent. The yield premium investors demand to hold Portuguese bonds instead of bunds increased 4 basis points today to 131 basis points, the highest since April. Spain’s spread with Germany fell 2 basis points to 83.7, down from a nine-month high of 98 on Jan. 28. To contact the reporters on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net ; Meera Louis in Brussels at mlouis1@bloomberg.net .

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Greek Deficit Plan to Get EU Endorsement as Papandreou Pledges Wage Freeze

February 3, 2010

By Maria Petrakis and Meera Louis Feb. 3 (Bloomberg) — The European Commission today will ask finance ministers to endorse Greek measures to reduce the European Union’s biggest budget deficit as Prime Minister George Papandreou promised more action, including a freeze on state workers’ pay. “Greece is in the center of a speculative game aimed at the euro,” Papandreou said in a televised speech in Athens late yesterday. “It is our national duty to stop the attempts to push our country to the edge of the cliff.” Papandreou pledged to raise fuel taxes in a move that will boost income immediately, and said an overhaul of the tax system, which will increase 2011 revenue, would be targeted at the wealthier to protect poorer Greeks. He said it is time for Greece, like other EU countries, to take “brave decisions” and raise the retirement age. No state worker will receive a wage increase this year, Papandreou said, a reversal of a pledge he made before his Oct. 4 election victory. Greek unions last night called on workers to join a strike already planned for Feb. 10 to protest the government’s cuts. The commission, the Brussels-based EU executive, has warned that Greece may need to take further steps to shore up the budget even as it prepares to support the government’s program to rein in its deficit. The three-year plan Papandreou outlined last month includes measures to cut spending and raise revenue by 10 billion euros ($14 billion) this year. ‘Subject to Risks’ The planned correction of the deficit by 2012 “is feasible but subject to risks,” commission President Jose Barroso said yesterday. The commission will recommend in a report today that European finance ministers endorse the Greek program at a meeting in Brussels later this month. Skepticism about Papandreou’s plan drove the premium that investors demand to hold Greek 10-year bonds instead of benchmark German bunds to almost 400 basis points last week, the highest since the year before the euro’s debut in 1999. Concern that Greece and other European nations may struggle to contain their deficits has pushed the euro down more than 7 percent since late November. Papandreou yesterday urged Greeks to support the new measures and said the country couldn’t afford strikes and blockades that may derail the attempt to get the economy back on track. He sought backing in a series of meetings with political party leaders yesterday. Papandreou’s Measures Adedy, the federation of Greek state worker unions, had already called a strike for Feb. 10 to protest the government’s initial plans to cut bonuses and put a partial freeze on wages. Last night, the organization said Papandreou’s measures “confirmed our expectations” and urged workers to join the strike. Greece, which had the EU’s widest deficit at 12.7 percent of gross domestic product last year, has struggled to convince investors it can bring the budget shortfall within the bloc’s limit of 3 percent. Greek 10-year bonds declined yesterday, sending the yield up 14 basis points to 6.75 percent. The difference in yield between the Greek securities and bunds widened 13 basis points to 357 points. Spanish and Portuguese debt also fell as Greece’s finance minister said those nations face similar challenges in paring their deficits. The EU will institute “a completely new mechanism to monitor” Greece’s budget cuts, European Economic and Monetary Affairs Commissioner Joaquin Almunia said in a Feb. 1 interview in Brussels. The government will have to submit a progress report by March 16, with a second report due on May 15, followed by quarterly updates. ‘Intense Surveillance’ “The commission will be in charge of monitoring the implementation of the program through a very intense surveillance,” Barroso said yesterday. “The successful correction of its very excessive deficit is not only important for Greece, but for the euro area and the EU as a whole.” Economist Nouriel Roubini said in an interview today that the EU or the International Monetary Fund will probably offer financial aid to Greece to help the country avoid default. “I expect there is going to be eventually some financial support,” Roubini told Bloomberg Television in Moscow. That support will come “either directly from the European Union or the ECB or, as I suggest, Greece should be going to the IMF to get an IMF package,” he said. The EU today also will take a first step toward a court case to force Greece to improve its reporting of deficit figures and other economic statistics. The commission said on Jan. 12 that “severe irregularities” in the nation’s statistical data leave the accuracy of the deficit in doubt. Soon after winning elections in October, Papandreou’s government raised the 2009 deficit estimate to more than 12 percent from a previous forecast of 3.7 percent. The commission questioned the accuracy of the statistics presented by both the new government and the previous administration and said political interference remained an issue. To contact the reporters on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net ; Meera Louis in Brussels at mlouis1@bloomberg.net .

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Greece to Sell $4.2 Billion of Bonds in `Near Future,’ Papanicolaou Says

January 22, 2010

By Maria Petrakis Jan. 22 (Bloomberg) — Greece plans to sell a minimum of 3 billion euros ($4.2 billion) of five- or 10-year bonds in the “near future,” said Spyros Papanicolaou, head of the country’s debt-management agency. The government has no immediate plans to sell debt through private placements and the banks haven’t yet been chosen for the bond sale, he said today in a telephone interview in Athens. To contact the reporter on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net

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Greece’s Papaconstantinou Under Siege as Deficit Woes Hurt Ratings, Bonds

December 11, 2009

By Maria Petrakis Dec. 11 (Bloomberg) — Greek Finance Minister George Papaconstantinou began the week with his office protected by baton-wielding riot police taming student protests. Now, investors have him under siege as the country’s bonds tumble . “Things are difficult, there’s no question about it,” he said in an interview yesterday in his office overlooking Syntagma Square, the hub of downtown Athens. “It’s a very hard fiscal situation. It’s not one that’s not reversible.” Papaconstantinou, 48, has spent much of the past week reassuring investors and European leaders that Greece won’t default on its $350 billion in debt , its banks will keep access to European Central Bank financing and Prime Minister George Papandreou understands the worst fiscal crisis in 15 years. Greek bonds plunged to their lowest in seven months on Dec. 9 and stocks slumped after Fitch Ratings cut Greece one step to BBB+, saying Papandreou’s two-month-old government isn’t doing enough to tame a deficit of 12.7 percent of output, the highest in the European Union. A day earlier, Standard & Poor’s put its A- rating on watch for downgrade. The yield on Greece’s 2-year bond has surged 127 basis points to 3.15 percent this week, driving it above Turkey’s for the first time. “I spent two hours on the phone with the finance minister a couple of days ago, and he understands the position they’re in,” Fitch analyst Christopher Pryce said in an interview on Dec. 9. “I am not convinced that the cabinet, even the prime minister, understand just how severe the situation is.” Courage Needed European officials added to pressure on Greece. ECB President Jean-Claude Trichet said Dec. 9 that “courageous” action to close the budget gap. Economists pointed to Ireland’s decision to cut wages for public servants, compared with Greece’s 1.5 percent pay increase for most workers. The market turmoil coincided with social unrest as Greek police clashed with 5,000 protesters one year after the fatal shooting of a teenager by police, which damaged the former government of Kostas Karamanlis. Papandreou appointed Papaconstantinou, who holds a doctorate from the London School of Economics, after he led the socialists to victory in October elections, winning a 10-seat majority in parliament. While the party won on a platform of higher wages that contrasted with Karamanlis’s pledges for a pay freeze, Papaconstantinou was within weeks forced to publish revised figures that cast doubt over Greece’s fiscal health. Recession Data showed Greece’s deficit this year would be more than twice the previous government’s forecasts and four times the EU limit. Other revisions showed that, rather than being one of the few European economies still growing amid the worst global slump since World War II, Greece had been in a recession for a year. Papaconstantinou’s defends his government’s strategy to reduce the deficit by more than 3 percentage points of GDP to 9.1 percent next year. “What exactly has changed in the last 40 days to justify a downgrade?” he said of the Fitch decision. Greece needs to show that it will do more than rely on optimistic revenue forecasts and one-time measures to achieve those gains, economists say. “Political pressure is mounting for the government to start taking bold action,” Giada Giani , an economist at Citigroup Inc. in London wrote in a note to investors. About 75 percent of the current deficit reduction plan comes from raising revenue rather than cutting spending, Deutsche Bank AG estimates. Much of that will come from a crackdown on tax evasion, a chronic problem in Greece that a series of governments have pledged to combat. New Plan Now after just two months as finance minister and with the rating companies circling, Papaconstantinou must design a new plan due in January to convince EU leaders that Greece is serious about cutting the deficit and deserves an extension of the 2010 deadline to get its shortfall back within the EU limit. “Rating agencies and EU institutions will probably want to see much more structural measures than currently announced to tackle the deficit, aimed at permanently and credibly increasing tax revenues and tackling age-related soaring public spending,” Giani said. Nevertheless, talk of a default may be overblown because the rest of the EU would probably help Greece, says the head of the Organization for Economic Cooperation and Development. “The question of the ratings is perhaps of less consequence than one should think,” said Secretary General Angel Gurria in an interview yesterday. OECD Experience Papaconstantinou, married with two sons aged 14 and 11, says 10 years as an economist at the OECD will help him argue his case in Europe. “You have to be able to have a presence around the Eurogroup table; you need to know what you’re talking about,” he said. “Especially because the issues have become infinitely more complicated than they have been in the past. For now, Papaconstantinou says the force of the bond market isn’t disrupting his life as it might other people. “Actually I sleep quite well,” he said. “I think that’s one of the big advantages I have. I’m fairly level-headed in general and even though I do worry about things they don’t keep me up at night.” To contact the reporter on this story: Maria Petrakis &cle; in Athens at mpetrakis@bloomberg.net

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Greek Finance Minister Papaconstantinou Says Absolutely No Risk of Default

December 9, 2009

By Francine Lacqua and Maria Petrakis Dec. 9 (Bloomberg) — Greek Finance Minister George Papaconstantinou said there is “absolutely” no risk that the country will default on its debt, seeking to ease the concerns of investors after Greece had its credit rating cut yesterday. “We’re moving swiftly to reassure citizens and markets that we’re moving in the right direction,” Papaconstantinou said today in an interview with Bloomberg Television. The minister also said that Greece will not seek a European Union aid package. Fitch Ratings cut Greece one step to BBB+, the third-lowest investment grade, a day after Standard & Poor’s put Greece’s A- rating on watch for a possible downgrade, signaling it may be reduced within two months. The ratings companies cited concern the nation may struggle to meet its debt commitments as public finances deteriorate. Greece has the highest budget deficit in the 27-nation EU. Greek 10-year government bonds fell. The difference in yield, or spread, over German bunds widened 7 basis points to 228 basis points as of 8:43 a.m. in London. Greece’s Athens Stock Exchange General Index declined for a third straight day, falling 2.3 percent, with National Bank of Greece SA , the largest lender, losing 4.4 percent to 17.40 euros. Papaconstantinou said there is no risk to the Greek banking system as the banks are “fundamentally sound.” Greece’s socialist government, elected in October, plans to cut the budget deficit to 9.1 percent of gross domestic product next year from 12.7 percent this year. Papaconstantinou, an economist with studies from the London School of Economics and 10 years at the Organization for Economic Cooperation and Development , is fending off criticism from the European Union and investors that he is not doing enough. Budget Plans The Greek government budget plans, including one-off measures and a partial freeze on public-sector pay, “are unlikely by themselves to alter Greece’s medium-term fiscal dynamics” given the prospects of high deficits, debt and sluggish economic growth, S&P said. Former Bank of England policy maker Willem Buiter said Greece may be the first major country in the European Union to default on its debts since World War II. “It’s five minutes to midnight for Greece,” Buiter said in a Bloomberg Television interview. “We could see our first EU 15 sovereign default since Germany in 1948.” To contact the reporter on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net ; Francine Lacqua in London at flacqua@bloomberg.net .

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Greece Set for EU Rebuke on `Insufficient’ Budget Reduction, Draft Shows

November 26, 2009

By Meera Louis and Maria Petrakis Nov. 26 (Bloomberg) — European Union finance ministers will reprimand Greece next week for failing to take “credible and sustainable” measures to reduce its budget deficit toward the EU limit of 3 percent of output, a draft document shows. Significant revenue shortfalls and expenditure overruns “led to a strong deterioration in Greece’s budgetary position in 2009, which can only partly be attributed to the deterioration of the macroeconomic conditions,” according to the document, obtained by Bloomberg News. They are “mainly due to an insufficient response by the Greek authorities.” The document, prepared by a group composed of officials from the 27 EU nations, the European Central Bank and the European Commission, will be discussed by finance ministers at a meeting in Brussels on Dec. 1 and 2. Unlike other euro-area nations, all of which will have deficits exceeding 3 percent of gross domestic product next year, Greece has yet to receive an extension to the 2010 deadline to cut its deficit below the ceiling. Greece’s economy will contract 0.3 percent next year, compared with growth of 0.7 percent in the euro-region as a whole, the EU forecast Nov. 3. Greece, which has met the EU deficit limit only once since adopting the euro in 2001, revised its forecast for the shortfall from a 3.7 percent for this year to 6 percent in September. After Oct. 4 elections, which ushered in a new socialist government led by George Papandreou , the target rose to 12.7 percent, more than four times the EU limit, prompting Monetary Affairs Commissioner Joaquin Almunia to say Greece’s finances have become a “concern for the whole euro area.” Rating Cut The country’s credit rating was cut one step to A- by Fitch Ratings last month and Moody’s Investors Service placed the ratings on review for a possible downgrade after Greece increased the estimates for its deficit. European Central Bank President Jean-Claude Trichet has said the country’s finances and revisions of its economic data have dented its credibility. The difference in yield, or spread, between 10-year Greek government bonds and equivalent-maturity German bunds widened 9 basis points today to 188, the biggest gap since June 9. Greece’s benchmark ASE stock index has fallen 18 percent in the past month, the largest slide among western European benchmarks. Public finances deteriorated as many of the deficit-control measures adopted this year were never implemented. The government failed to control spending and was unable to make good on pledges to boost tax collection. The EU opened its first investigation into Greece’s deficit in 2004 after a revision of data revealed that, contrary to previous indications, the deficit had exceeded the EU ceiling every year since the country adopted the euro. The commission remains critical of Greek statistics, which are “manifestly inadequate,” the document said. Greece’s economic data from October 2009 still haven’t been validated due to commission queries over the figures, the report said. The commission said Nov. 3 that Greece would make little progress in reducing its shortfall, estimating a deficit of 12.2 percent next year and 12.8 percent in 2011 on a “no- policy- change” basis. The government has said it will bring the shortfall down to 9.1 percent next year though a combination of tighter controls on spending and renewed vigor in collecting taxes and cracking down on evasion. Finance Minister George Papaconstantinou is seeking to convince the EU to grant Greece an extension to the 2010 deadline for meeting the 3 percent deficit target. That may occur after the commission evaluates the new socialist government’s budget and mid-term economic plan, due in January. To contact the reporter on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net

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Papandreou Wins Greek National Election; Karamanlis Quits as Party Leader

October 4, 2009

By Maria Petrakis and Natalie Weeks Oct. 4 (Bloomberg) — Socialist leader George Papandreou , the son and grandson of former prime ministers, won Greek elections on pledges to increase public spending and wages to combat the country’s first recession in more than a decade. Papandreou and his Pasok party won 43.4 percent of the vote and 158 seats in the 300-seat legislature, according to the projections by the Interior Ministry based on 22 percent of the votes counted. Prime Minister Kostas Karamanlis and the ruling New Democracy Party had 35.9 percent of the vote and 97 seats, losing more than a third of their current representation. Papandreou, 53, and his wife were mobbed by a crowd of thousands of supporters waving green and white Pasok flags as they arrived at the party’s headquarters on Hippocrates Street in downtown Athens. Drivers raced through the city’s streets honking their horns to celebrate the Socialist return to power after five years in the opposition. Papandreou inherits an economy set to contract this year for the first time since 1993, ending a run of annual growth of about 4 percent. The global recession has slammed shipping and tourism, the country’s biggest industries, and public debt is set to rise to more than 100 percent of output, Europe’s second- biggest debt load after Italy. Papandreou pledged to return the country to growth by stepping up public spending and raising wages. He also said that even with the increased spending he could still trim the budget deficit , currently twice the European Union limit of 3 percent of gross domestic product. Early Vote Karamanlis called elections in September, two years early, saying he needed a new mandate to confront the weakening economy and swelling deficit. The strategy backfired and the party may have suffered its worst loss in its 35 year history. Both leaders hail from Greek political dynasties and it was the third time they had faced off in elections, with Karamanlis taking the first two encounters in 2004 and 2007. Papandreou is the son and grandson of former prime ministers and his father, Andreas, founded Pasok in 1974, while Karamanlis is the nephew of New Democracy founder and former premier Costas Karamanlis. Karamanlis’s popularity sagged after the 2007 elections as he tried to tame the deficit at a time when the Greek economy was slowing and unemployment was creeping higher. His policies of new taxes, tighter pension rules and selling stakes in state- owned companies, have prompted strikes and protests. Corruption scandals further undermined his administration. His government came in for criticism after youths rampaged through Athens in December 2008 following the police shooting of a teenager. To contact the reporter on this story: Natalie Weeks in Athens at nweeks2@bloomberg.net Maria Petrakis in Athens at mpetrakis@bloomberg.net

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Papandreou Favored to Win Greek Elections Today, Extending Family Dynasty

October 4, 2009

By Maria Petrakis Oct. 4 (Bloomberg) — George Papandreou is favored in polls to unseat Prime Minister Kostas Karamanlis in Greek elections today, extending his family’s political dynasty and inheriting an economy on the brink of recession. More than 9.8 million Greeks are eligible to cast ballots in the vote. Polls opened at 7 a.m. Athens time and close at 7 p.m. when exit polls will be released. Papandreou’s Pasok party led Karamanlis and the New Democracy party by between 6 percentage points and 7.5 percentage points in the three final polls of the month-long campaign, which were published on Sept. 18. He has held the lead since September 2008. The surveys indicated Pasok may win a majority in the 300-seat parliament. “I am certain that together we can change Greece” Papandreou, 57, said today after casting his ballot in Athens, the capital. “We want to, we can and we will.” Karamanlis, who was hobbled by a one-seat majority in parliament, last month called the vote two years early, saying he needed a new mandate to confront a weakening economy and growing budget deficit. He pledged wage and pension freezes to trim the shortfall, currently twice the European Union limit of 3 percent of output. Papandreou offered higher wages and more public spending, saying he would still tame the deficit. ‘Decision of Responsibility’ “Today Greeks take a decision of responsibility,” Karamanlis, 53, said after casting his vote in the northern Greek city of Thessaloniki. “They are deciding on policies which are difficult but guarantee a dynamic jump-start in the race for growth from 2011 onwards.” The two, scions of Greek political dynasties, are facing off for a third time in national elections. Karamanlis won encounters in 2004 and 2007. The U.S.-born Papandreou is the son and grandson of former prime ministers, while Karamanlis is the nephew of the founder of the New Democracy party. The winner will inherit an economy set to contract this year for the first time since 1993, ending a run of annual growth of about 4 percent. The global recession has slammed shipping and tourism, the country’s biggest industries, and public debt is set to rise to more than 100 percent of output next year, Europe’s second-biggest debt load after Italy. Standard & Poor’s cut Greece’s credit rating to A- in January, the lowest rating among the 16 countries using the euro. Public Finances The premier’s efforts to improve public finances, which included new taxes, tighter pension rules and selling stakes in state-owned companies, have prompted strikes and protests. Corruption scandals further undermined his administration. In December, the government came in for criticism after youths rampaged through Athens and other cities following the police shooting of a teenager. Papandreou says government mismanagement, not just the global recession, is to blame for the slump. He’s pledged to revive growth by spending 3 billion euros ($4.4 billion) on public works, increasing education spending by 1 billion euros in the first year, raising taxes on the wealthy, and collecting 31 billion euros through a crackdown on tax evasion. The ruling party has called the plans “unrealistic” Unemployment Gains With unemployment at a three-year high of 8.9 percent and about twice that for young people, Papandreou’s promise to focus on youth joblessness resonated with some voters. Yannis Daskalakis, 23, who earns 5 euros an hour handing out free newspapers in central Athens, says he hopes voting for Pasok will help him get what he wants most: a permanent job providing home assistance for the elderly. “Papandreou says he’ll create jobs,” Daskalakis said. “He says in the first 100 days he has a plan. People expect those promises to be kept. They lost faith in Karamanlis because he made promises he didn’t keep even after they gave him a second chance.” Some of Papandreou’s other promises may rattle investors. He risks further widening the deficit with his plan to step up public-works spending and raise wages. That could increase the premium bondholders demand for buying Greek debt over comparable German securities, which is currently about 138 basis points. When Karamanlis won re-election in September 2007, the spread was about 30 basis points. Papandreou has also said he may seek to renegotiate the sales of some state companies such as Olympic Airlines SA and Hellenic Telecommunications Organization SA , known as OTE, to private partners such as Bonn-based Deutsche Telekom AG . To contact the reporter on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net

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Greek Firefighters Battle on Two Fronts Near Athens as Winds Begin to Ease

August 24, 2009

By Maria Petrakis Aug. 24 (Bloomberg) — Greek firefighters battled on two fronts to control blazes near Athens, the country’s worst since 2007, as winds eased for the first time since the fires began three days ago. Aircraft began water-bombing the area, along the capital’s northeastern perimeter, at daybreak today. A swathe of forestland has been destroyed and houses, hospitals, campgrounds and retirement homes in the path of the fires have been evacuated. No casualties have been reported in the Attica region, which includes Athens. “The eastern Attica fire continues to burn, but without the intensity of previous days,” Fire Department spokesman Ioannis Kapakis said in a briefing televised live on state-run NET TV . He said two fronts continued to present concern. Planes and helicopters began dropping water on the fires at 6:17 a.m. local time, the Greek air force said in a statement. The military is being assisted by aircraft from Italy and France, which were provided after Greece asked for European Union assistance. Strong, swirling winds reignited embers and sparked new outbreaks as soon as some were extinguished, hampering the work of firefighters and air crews who have been working since the fire began at Grammatikos, about 40 kilometers northeast of Athens. “A massive ecological catastrophe” has resulted from the blaze, which has destroyed about 120,000 stremmata (120 square kilometers), Athens Prefect Yannis Sgouras told state-run NET TV yesterday. No Damage Estimate There has been no estimate of property damage from the inferno, the worst fire emergency since 65 people were killed in Greece two years ago. Then, scorching temperatures and high winds combined to cause more than 250 blazes, destroying 250,000 acres (10,000 hectares) of forest and farmland and leaving 2,500 people homeless. Temperatures in wider Athens are forecast to reach 32 degrees Celsius, and winds may be as strong as 7 on the Beaufort scale, or near gale force, according to the latest weather forecast . The fire risk for Attica will continue to be “extremely high”, according to a statement yesterday from the country’s civil protection agency. To contact the reporter on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net .

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Athens Suburb Wildfires Force Evacuation of Hospitals as Winds Whip Flames

August 23, 2009

By Maria Petrakis Aug. 23 (Bloomberg) — Greek firefighters battled a wildfire on the outskirts of the capital Athens for a third day, while authorities evacuated hospitals, camping grounds and retirement homes overnight. No casualties were reported. Strong swirling winds continued to hamper the work of firefighters and aircraft dropping water, Athens Prefect Yannis Sgouras told state NET TV . About 120,000 stremmata (120 square kilometers) have been burned, “a massive ecological catastrophe,” he said. “The situation remains particularly difficult as weather conditions are expected to remain the same as yesterday,” Fire Department spokesman Ioannis Kapakis said in televised statements on NET. From 6:00 a.m. yesterday to 6:00 a.m. today, 83 major fires were reported around the country, with blazes on the islands on Zakynthos, Evia and Skyros among another five considered to be of serious concern, he said. No casualties have been reported and no tally of property damage has been made available. Greek media has reported dozens of homes have been damaged. Authorities, which declared a state of emergency for the region yesterday, evacuated children’s hospitals and retirement homes overnight as a precautionary measure as the biggest fire in the country this season approached the outskirts of Athens. The fire reached as close as the courtyard of the Penteli children’s hospital, which had been earlier evacuated, Sgouras said. Water Bombing Aircraft began water-bombing the front of the fire early again today, to be joined by two airplanes from Italy and France and a helicopter from Cyprus, according to NET. Israel has also offered to send fire-fighting aircraft, the broadcaster said. The blaze, which began at Grammatikos, about 40 kilometers northeast of the capital on the evening of Aug. 21, has spread with help of strong, swirling winds. Greek television showed residents and firefighters wearing facemasks amid dense smoke from the fires. Greece suffers dozens of fires daily over the summer period with most being brought under control in a matter of hours. Two years ago this month, scorching temperatures and high winds combined to cause over 250 blazes, which killed 65 people and destroyed 250,000 acres of forest and farmland. The country declared a national emergency on Aug. 25, 2007, deploying nearly 15,000 firefighters to put out the flames. The blazes left 2,500 people homeless. To contact the reporter on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net .

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