Brussels stops short of a Greek bailout
European leaders pledged support for the Greek recovery plan at the start of an impromptu Brussels summit yesterday, but stopped short of the full bailout media analysts had led the markets to expect. "we fully support the efforts of the Greek government and their commitment to do whatever is necessary, including adopting additional measures to ensure that the ambitious targets set in the stability programme for 2010 and the following years are met," the statement said. It forecast close monitoring of the plan's implementation together with the IMF, and did not exclude possible additional measures.
Any effect on stock, financial and currency markets is unlikely to show until trading begins today, as the Council's statement was issued after European trading hours.
"We have the will to do everything for Greece to regain its lost credibility and its place in Europe," said Prime Minister Yiorgos Papandreou, blaming the conservative government he defeated last October for the present predicament. "Greece is living through the catastrophic policies of the recent past. We Greeks are experiencing the results of irresponsible policies in our daily lives."
Conservative opposition leader Antonis Samaras expressed gratitude for the European support for the Greek recovery plan, but reserved some criticism for Papandreou. "He is not the most suitable person to talk about integrity and responsibility," Samaras said. "The catastrophic opposition exercised by his party was irresponsible. So was his pre-election demagoguery that 'there is money available'."
The statement by European leaders:
Yiorgos Papandreou's statement:
Antonis Samaras' statement:
Financial Times cover story:
FT's Lex analysis, that Greece should choose an IMF bailout, should it need one, over a eurozone bailout, if the interest rate is lower:
The Greek press reaction
Kathimerini (nominally conservative): "We should pause today and ask ourselves what led us to the brink of bankruptcy and IMF/EU guardianship. The responsibility belongs to politicians who handled the country's finances and behaved irresponsibly and reprehensibly. Personal favours, appoinments, the creation of new public services such as the border patrol, benefits and unjustifiable expenditures sank the country in debt. What is needed now is a new breed of politician who will take unpopular decisions..."
Ta Nea (nominally socialist): "Yesterday's dramatic confession by Prime Minister Yiorgos Papandreou that 'we handled our finances in such a way as to lose a piece of our national sovereignty' shows the tragic situation in which our country now finds itself. His assertion that the country is now in the most difficult period of its modern history leaves no room to avoid painful sacrifices and new tough measures which are necessary if the country is to regain its prestige and prosperity."
Eleftherotypia (nominally socialist): "Brussels has begun to understand that the problem of Greece, Spain and Portugal is European and therefore these countries must not be left to deal with it themselves without the danger arising of a transmission of the disease to the entire eurozone."
Apogevmatini (unofficial mouthpiece of the conservative New Democracy party): "The government's lack of agreement creates a new problem for the people, which is impossible to understand. Either the crisis is as great as they describe, and if very tough measures are not taken we are headed for a crash; or there is a safe exit and they are deceiving us into believing that it is a great crisis so that they can impose unjustifiable measures for many people, according to the dictates of Brussels. And when we come to the safe exit they are already aware of they will present themselves to us as heroes."
Credit spreads linked to recovery
The FT's John Authers highlights a Barklay's study which finds that high bond spreads, such as those the Greek bond market is suffering from, seem to inhibit market recovery:
"Looking for the key factors driving recoveries, Barclays found that economic growth and profits were not particularly important. Instead, the strongest link was with credit spreads. Provided credit continued to get cheaper (as shown by the extra spread for corporate debt compared to government debt), then relief rallies could continue. Once credit spreads widen, equities cannot make much headway."