In World Economy News 20/02/2015
Greece’s government submitted a request to its euro-area creditors to extend the availability of bailout funds for six months in a last-ditch effort to avert a cash crunch.
Jeroen Dijsselbloem, who chairs meetings of the 19 euro-area finance ministers, confirmed on Twitter that the group had received the request. Euro-area officials are scheduled to assess the Greek proposal later Thursday. If they see room for an agreement, the currency bloc’s finance ministers will discuss it on Friday.
The Greek state and its banks have effectively lost market access and stay afloat thanks to emergency lifelines extended by euro-area member states and the European Central Bank. The aid is attached to belt-tightening terms which the country’s new government, led by Alexis Tsipras, opposes. Two attempts to strike a compromise in the last 10 days ended in acrimony.
ECB policy makers on Wednesday raised the limit on Emergency Liquidity Assistance for Greek banks to 68.3 billion euros ($77.9 billion) from 65 billion euros, a euro-area central-bank official said, asking not to be identified because the matter is private. Greece has been at odds with other euro-area governments over the formula needed to extend the country’s 240 billion-euro rescue beyond its expiry at the end of February.
Greek government bonds dropped for the third time in four this week. The three-year yield rose 37 basis points, or 0.37 percentage point, to 17.73 percent as of 12:09 p.m. in Athens. That’s still down from 21.1 percent last week, the highest since the debt started trading again last year, and a record 128 percent in March 2012. The euro rose 0.2 percent to $1.1420. Greek stocks rose 1.8 percent.
U.S. Treasury Secretary Jacob J. Lew warned in a call with Greek Finance Minister Yanis Varoufakis Wednesday that failure to strike a compromise would bring immediate hardship to Europe’s most-indebted state.
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French Premier: Greek PM’s Letter to EU is Sign Solution is Possible
French Prime Minister Manuel Valls said Thursday Greece’s request for an extension of its bailout is encouraging, marking some contrast with Germany’s abrupt rejection of the request earlier in the day.
“I take the latest declarations and decisions of the Greek Prime Minister, in a letter to Europe, as a very encouraging sign that a solution is possible, and very quickly,” Mr. Valls said.
The letter from Greek Prime Minister Alexis Tsipras contained a number of pledges on finances, but the German finance ministry said the request did not offer a substantial solution and fell short of the terms of the previous bailout.
Finance ministers from the Eurozone are due to meet Friday afternoon to discuss the situation as Greece risks running out of financing without an agreement.
France has taken a more conciliatory tone with Greece and the leftist government of Mr. Tsipras that came to power in January on a platform of overhauling the terms of its bailout. French officials say that Greece must respect its commitments to Europe and pay off its debts, but Europe must also respect the result of the Greek elections.
“I say this to all Europeans: the choices of the Greek people must be respected, but the new Greek government must make a lasting commitment to Europe and the euro,” Mr. Valls told lawmakers in the French parliament.
“France acts and will act right to the end for Greece to keep its place in Europe,” Mr. Valls said.
