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2011,Nov
W

Greek leaders to pick PM of new government

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Greece’s Prime Minister George Papandreou waves to journalists while exiting the Presidential Palace after a meeting with Greek President Karolos Papoulias and opposition leader Antonis Samaras, in Athens Sunday, Nov. 6 2011. Greece’s embattled prime minister and the head of the main opposition party reached an initial agreement to form an interim government that will ensure the country’s new European debt deal and then lead Greece to early elections, the president’s office said. (AP Photo/Kostas Tsironis)

Greece’s Prime Minister George Papandreou waves to journalists while exiting the Presidential Palace after a meeting with Greek President Karolos Papoulias and opposition leader Antonis Samaras, in Athens Sunday, Nov. 6 2011. Greece’s embattled prime minister and the head of the main opposition party reached an initial agreement to form an interim government that will ensure the country’s new European debt deal and then lead Greece to early elections, the president’s office said. (AP Photo/Kostas Tsironis)

Three journalists reach out to secure a copy of the communiqu? issued by Greece’s presidency in Athens Sunday, Nov. 6 2011. Greece’s embattled prime minister and the head of the main opposition party reached an initial agreement to form an interim government that will ensure the country’s new European debt deal and then lead Greece to early elections, the president’s office said. (AP Photo/Kostas Tsironis)

A clerk in Greece’s presidency tries to distribute copies of an official communiqu? to a throng of waiting journalists, in Athens Sunday, Nov. 6 2011. Greece’s embattled prime minister George Papandreou and the head of the main opposition party Antonis Samaras reached an initial agreement to form an interim government that will ensure the country’s new European debt deal and then lead Greece to early elections, the president’s office said. (AP Photo/Kostas Tsironis)

Opposition leader Antonis Samaras looks on during a meeting at the Presidential Palace with Greek President Karolos Papoulias and Greece’s Prime Minister George Papandreou, in Athens on Sunday, Nov. 6 2011. Greece’s embattled prime minister and the head of the main opposition party reached an initial agreement to form an interim government that will ensure the country’s new European debt deal and then lead Greece to early elections, the president’s office said. (AP Photo/Kostas Tsironis)

Greece’s Prime Minister George Papandreou, attends a meeting at the Presidential Palace with Greek President Karolos Papoulias and opposition leader Antonis Samaras in Athens on Sunday, Nov. 6 2011. Greece’s embattled prime minister and the head of the main opposition party reached an initial agreement to form an interim government that will ensure the country’s new European debt deal and then lead Greece to early elections, the president’s office said. (AP Photo/Kostas Tsironis)

ATHENS, Greece (AP) ? The leaders of Greece’s two biggest parties are due to resume talks Monday to agree on who should be the country’s new prime minister, after reaching a historic power-sharing deal to push through a massive financial rescue deal and prevent imminent bankruptcy.

Europe’s markets and government, however, remained cautious that the power deal would resolve the country’s political turmoil and alleviate concerns over Greece’s membership of the euro.

Socialist Prime Minister George Papandreou and conservative leader Antonis Samaras are to hold fresh talks to hammer out the composition of the new 15-week government, which will be tasked with passing the euro130 billion ($179 billion) package from the country’s international creditors before elections.

Former European Central Bank vice president Lucas Papademos is being tipped as the most likely new head of the government that would serve until a Feb. 19 general election.

Officials in Greece’s two main political parties have confirmed that the 64-year-old former central banker is a candidate though there’s no indication yet he would want the job, for however short a period.

None of the people being considered have been announced publicly.

Papandreou and Samaras agreed on the interim coalition late Sunday under mounting international pressure for cross-party acceptance of the deal following a week of turmoil in the markets as investors fretted over a disorderly Greek default and the country’s possible exit from the euro.

As part of the deal, Papandreou agreed to step down halfway through his four-year term. Elected after a landslide victory a little over two years ago, Papandreou’s stock took a big battering last week after his call for a referendum on Greece’s latest rescue package, that was agreed less than two weeks ago.

Though the referendum pledge was pulled after Greece’s main conservative opposition said it agreed to the broad outlines of the rescue deal, markets remain in a jittery state, especially as the country needs the next batch of bailout cash within weeks to pay off debts.

“There are cool-headed people in both parties,” Justice Minister Miltiadis Papaioannou told private Antenna television. “This was not a card game; it was about keeping the country on its feet.”

Senior conservative officials conceded they had come under strong pressure from European Union officials before withdrawing their demand for an immediate general election.”

All European markets have opened sharply lower Monday, though shares on the Athens Stock Exchange bucked the trend, trading 2 percent higher.

European governments also remained cautious as they awaited developments on the composition of Greece’s new government. Finance ministers from the 17 eurozone countries are due to meet later in Brussels, and will be awaiting an update from Greece’s Evangelos Venizelos.

“What is clear is that the European partners are becoming more and more intransigent with Greece and they will want evidence of concrete advances on Monday evening,” said Silvio Peruzzo, an analyst at Royal Bank of Scotland.

Germany’s vice chancellor Philipp Roesler again warned Greece not to delay in pushing through reforms.

“The Greeks themselves have the choice: reforms in the eurozone or no reforms, and out. There is no third way,” he told the popular German daily Bild

Frustrated with Greece’s protracted political disagreements, the country’s creditors have threatened to withhold the next critical euro8 billion ($11 billion) loan installment until the new debt deal is formally approved in Greece.

Greece is surviving on a euro110 billion ($150 billion) rescue-loan program from eurozone partners and the International Monetary Fund. The new government’s main task is to push through the second euro130 billion deal, that involves private creditors agreeing to cancel 50 percent of their Greek debt.

Punishing austerity imposed in exchange for the rescue loans, brought Papandreou’s government to its knees. Its efforts to keep the country solvent have prompted violent protests, crippling strikes and a sharp decline in living standards for most Greeks.

“I don’t expect anything,” Athens resident Stavros Stournaras said for the new political agreement. “When people truly go hungry and there’s an uprising, then things will change.”

___

AP Television producer Theodora Tongas contributed.

Associated Press

Source: http://hosted2.ap.org/APDEFAULT/3d281c11a96b4ad082fe88aa0db04305/Article_2011-11-07-EU-Greece-Financial-Crisis/id-2af4da4b181e46ae9667ed2d3715f556

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2011,Oct
W

Banks nowhere near deal on Greece

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BRUSSELS?? Big banks are under pressure in Europe’s debt crisis, with finance chiefs pushing them to raise billions of euros in capital and accept huge losses on Greek bonds they hold.

The continent’s biggest financial institutions were at the center of talks as leaders entered marathon negotiations in Brussels, at the end of which they have promised to present a comprehensive plan to take Europe out of its crippling debt crisis.

“Between now and Wednesday we have to find a solution, a structural solution, an ambitious solution and a definitive solution,” French President Nicolas Sarkozy said as he arrived in Brussels on Saturday. “There’s no other choice.”

In addition to new financing for Greece, leaders want to make the banking sector fit to sustain worsening market turmoil and turn their bailout fund into a strong safety net that will stop big economies like Italy and Spain from falling into the same debt trap that has already snapped Greece, Ireland and Portugal.

But before the final deadline on Wednesday, they have to overcome many obstacles.

On Saturday, the finance ministers of the 27-country European Union decided to force the bloc’s biggest banks to substantially increase their capital buffers ? an important move to ensure that they are strong enough to withstand the panic that a steep cut to Greece’s debt could trigger on financial markets.

A European official said the new capital rules would force banks to raise just over ?100 billion ($140 billion), but finance ministers did not provide details on their decision. The official was speaking on condition of anonymity because it had been agreed to let leaders unveil the deal at their first summit Sunday.

“We have made real progress and have come to important decisions on strengthening European banks,” George Osborne, the U.K.’s chancellor of the exchequer, said as he left Saturday’s meeting.

The deal on banks was likely to be the only major breakthrough ready to announce on Sunday, leaving many important decisions and negotiations to be completed by Wednesday night.

On Friday, the first day of the marathon talks, the finance ministers of the 17 countries that use the euro ? and which have found themselves at the center of the crisis because of the currency they share ? agreed to demand Greece’s private creditors take big losses on their bondholdings.

But they still have get the banks to come along and convince them that the cuts are the best way to ensure that Athens can eventually repay its remaining debts.

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The picture in Greece, whose troubles kicked off the crisis almost two years ago, is bleaker than ever. A new report from Athens’ international debt inspectors ? the European Commission, the European Central Bank and the International Monetary Fund ? proved that a preliminary deal for a second package of rescue loans reached in July is already obsolete.

That plan would have seen banks and other private investors take losses of some 21 percent on their Greek bond holdings, while the eurozone and the IMF were to provide an extra ?109 billion ($150 billion) in bailout loans.

But the report showed that in the past three months Greece’s economic situation has deteriorated so dramatically that for the bank deal to remain in place, the official sector would have to provide some ?252 billion ($347 billion) in loans. Alternatively, to keep official loans at ?109 billion ($150 billion), banks would have to accept cuts of about 60 percent to the value of their Greek bonds.

“I believe we are now arriving at a more realistic view of the situation in Greece,” said German Chancellor Angela Merkel, the country that has long been advocating a more radical solution to Athens’ problems.

But Merkel and her eurozone counterpart were on for tough negotiations with the banks.

Charles Dallara, who has been representing private investors in the talks with the eurozone, said Saturday that negotiations that carried on sporadically throughout Saturday were making only slow progress.

“We’re nowhere near a deal,” he told The Associated Press in an interview.

Dallara, the managing director of the Institute of International Finance ? the world’s biggest bank lobbying group ? said current plans to cut Greece’s debt would leave the country as “a ward of Europe” for years.

He declined to say how much in losses banks would be willing to accept, saying only “we would be open to an approach that involves additional efforts from everyone.”

The eurozone has been working hard to reach a voluntary agreement with banks, rather than forcing losses onto the lenders, because that could avoid triggering billions of euros on payout for bond insurance and could destabilize markets even further.

However, in recent weeks some officials have no longer insisted that the deal remain voluntary.

Agreement on arguably the most important measure in the crisis plan remained even more elusive Saturday: boosting the firepower of the currency union’s ?440 billion ($600 billion) bailout.

Increasing the effectiveness of the fund ? called the European Financial Stability Facility ? is meant to help prevent larger economies like Italy and Spain from being dragged into the crisis. At the same time, the EFSF may be asked to help governments shore up their banks if they can’t raise the necessary funds on financial markets.

But Germany and France still disagree over how to give the EFSF more firepower. France wants the fund to be allowed to tap the ECB’s massive cash reserves ? an option that Germany rejects. Weaker economies, meanwhile, are wary of signing up to the other two parts of the grand plan ? bigger bank capital and cuts to Greece’s debt ? without assurance that sufficient buffers are in place.

Sarah DiLorenzo, Elena Becatoros, Raf Casert and Slobodan Lekic in Brussels contributed to this story.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Source: http://www.msnbc.msn.com/id/44998477/ns/world_news-europe/

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