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Greek Finance Minister Yannis Stournaras has said the country may need a third bailout but would not accept new austerity measures.
Yannis Stournaras said: “If there is need for further support to Greece, it will be in the order of about 10 billion euros [$13.4 billion], or much smaller than the previous programmes.”
Greece has already received two bailouts totalling about 240 billion euros.
Meanwhile, Cerman Chancellor Angela Merkel has warned about writing down any more Greek debt.
She said a so-called haircut of Greek debt would be bad for the stability of the eurozone, which has seen a return in investor confidence after years of worrying about the future of the single currency following bailouts of several nations – most recently, Cyprus.
“I am expressly warning against a haircut,” Angela Merkel said.
Greek Finance Minister Yannis Stournaras has said the country may need a third bailout but would not accept new austerity measures
“It could trigger a domino effect of uncertainty with the result that the readiness of private investors to invest in the eurozone again falls to nothing.”
Angela Merkel’s comments come after Germany’s finance minister, Wolfgang Schaeuble, said – for the first time – earlier this month that Greece will need another bailout to plug a forthcoming funding gap.
The issue of bailouts is a sensitive one in Germany, where Angela Merkel faces elections for a third term on September 22.
Many Germans feel they have already contributed enough to European bailouts.
The International Monetary Fund (IMF) last month estimated Greece would need around 11 billion euros in 2014-15.
On Sunday, Yannis Stournaras told Greek newspaper Proto Thema that any further bailout would be smaller than the previous two.
But he also warned that Greece would not accept any more forced spending cuts from its partners.
“We are not talking about a new bailout but an economic support package without new [austerity] terms… until 2016, the targets – our obligations – have been set and other measures or targets cannot be required.”
The Greek economy has shrunk further than any other in Europe, with bailout money only released on condition that the government imposes cuts and implements restructuring.
It comes after most of the 18-member eurozone countries came out of recession earlier this year.
Greece’s troika of lenders – the European Commission, the European Central Bank and the IMF – will review the aid programme in the autumn.
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President Nicos Anastasiades has urged eurozone leaders to revise the terms of Cyprus’ bank bailout, in a highly critical letter.
Nicos Anastasiades said the “haircut” imposed on large deposits under the 10 billion-euro bailout had significantly eroded the capital kept by businesses in banks.
Losses were imposed on big deposits in Bank of Cyprus (BoC) and Laiki Bank. BoC is now in trouble, the letter said.
The letter to Cyprus’s creditors, sent last week, was leaked on Wednesday.
“I urge you to support a long-term solution to Bank of Cyprus’ thin liquidity position,” Nicos Anastasiades said.
Laiki Bank is being wound up and its safe assets transferred to BoC.
For large depositors at both banks the first 100,000 euros is protected, but the government can tap up to 40% of their remaining deposits, to contribute billions towards the bailout.
President Nicos Anastasiades has urged eurozone leaders to revise the terms of Cyprus’ bank bailout, in a highly critical letter
But Nicos Anastasiades complained that “no distinction was made between long-term deposits earning high returns and money flowing through current accounts, such as firms’ working capital”.
“This amounted to a significant loss of working capital for businesses.”
The rescue was agreed in March with the troika of international lenders – the European Commission, European Central Bank (ECB) and International Monetary Fund (IMF).
Capital restrictions imposed to prevent a run on Cypriot banks have been eased, but remain in place. The president said such “artificial” measures “will only aggravate the depositors the longer they persist”.
“Rather than creating confidence in the banking system they are eroding it by the day,” Nicos Anastasiades warned.
The text of his letter appeared on the Open Europe think tank’s blog on Wednesday. His complaints about the bailout were also reported by the Financial Times.
Unnamed eurozone officials quoted by Reuters news agency say there are no plans to alter the terms of the bailout for Cyprus or to supply more funds.
Eurozone finance ministers will discuss the letter at a meeting in Luxembourg on Thursday, Reuters reports.
Cyprus has started receiving installments of the bailout package from international creditors.
Cyprus has received the first installment of a 10 billion-euro bailout package from international creditors, which was agreed earlier this year.
Cyprus received 2 billion euros ($2.6 billion) in loans, said a statement by the European Stability Mechanism (ESM).
Another 1 billion euros will be transferred before June 30, the ESM said.
Eurozone finance ministers are also expected to sign off the latest tranche of Greece’s bailout, as it continues to struggle to reform its economy.
Another topic on the agenda at their meeting in Brussels is Slovenia, which is seen as potentially likely to follow Greece and Cyprus in seeking help from European authorities.
Concerns are growing despite a plan unveiled last week by Slovenia’s government, aimed at avoiding a bailout.
The government plans to restructure the country’s stricken banking system, raise taxes and privatize swathes of state-owned companies.
Meanwhile, Greece is expected to receive as much as 7.5 billion euros in the latest payment of its massive 240 billion-euro bailout, first agreed in 2010.
It needs the money to pay wages, pensions and bondholders.
Cyprus has received the first installment of a 10 billion-euro bailout package from international creditors
Earlier this month, the International Monetary Fund (IMF), one of the “troika” of international lenders behind the bailout, said Greece had made “progress” in tackling its budget deficit over the last three years.
But it also said structural reforms to the economy had been “insufficient” and problems of tax evasion had not been addressed.
Further austerity measures have been a condition of Greece receiving the latest installments of its bailout.
In a separate development, Germany’s finance minister has warned again that a single EU bank rescue authority backed by a bailout fund was not viable without overhauling EU treaties.
Existing EU treaties “do not suffice to anchor beyond doubt a new and strong central resolution authority,” Wolfgang Schaeuble wrote in the Financial Times on Monday.
European officials have called for a strong central authority, backed by a European rescue fund, to decide on what to do with failing banks.
This, they say, is key to establishing a “banking union” that would, in theory, stabilize the financial system in the region.
But Wolfgang Schaeuble said that promises to create an authority quickly without changing treaties would cost the EU credibility.
“We should not make promises we cannot keep,” he said.
“Amending the treaties takes time.”
Instead, he proposed that national agencies should co-operate with each other to oversee bank rescues.
This would result in a “timber-framed, not a steel-framed, banking union”, but it would buy time until treaty changes are made.
The European Commission, the EU’s executive arm, is working on a proposal for a mechanism to deal with failing banks, which it plans to unveil next month.
Finance ministers from eurozone have agreed a 10 billion-euro ($13 billion) bailout package for Cyprus to save the country from bankruptcy.
The deal was reached after talks in Brussels between the ministers and the International Monetary Fund (IMF).
In return, Cyprus is being asked to trim its deficit, shrink its banking sector and increase taxes.
For the first time in a eurozone bailout, bank depositors are facing a levy on their savings.
Cyprus’ banks were badly exposed to Greece, which has itself been the recipient of two huge bailouts.
“The Eurogroup was able to reach a political agreement with the Cypriot authorities on the cornerstones of this agreement,” Eurogroup head Jeroen Dijsselbloem said after almost 10 hours of the negotiations.
“The assistance is warranted to safeguard financial stability in Cyprus and the eurozone as a whole,” he added.
IMF chief Christine Lagarde, who took part in the talks, said earlier: “We don’t want a Band-Aid. We want something that lasts, that is durable and sustainable.”
The deal also involves a levy on bank deposits intended to ensure investors contribute to the bailout.
Finance ministers from eurozone have agreed a 10 billion-euro bailout package for Cyprus to save the country from bankruptcy
People with less than 100,000 euros in Cypriot bank accounts will have to pay a one-time tax of 6.75%, while those with more will have to pay 9.9%. It is expected to raise 5.8 billion euros in additional revenue.A European Central Bank (ECB) official said the Cypriot authorities had already started to take action to ensure that the levy can be collected. Otherwise, there would be a likelihood of massive withdrawals to avoid it, our correspondent adds.
There has also been speculation that Russia could help finance the bailout by extending a 2.5 billion-euro loan already made to Cyprus. Cypriot Finance Minister Michael Sarris will travel to Moscow for meetings on Monday, reports say.
There are a lot of Russian deposits in the Cypriot banking system, according to economists.
Jacob Funk Kirkegaard, of the US-based Peterson Institute for International Economics, said that was a potential problem for any bailout negotiations.
“There is a general political sentiment that it is not acceptable to be bailing out a country, and thereby putting European taxpayers’ money at risk, to basically protect Russian depositors in Cypriot banks,” he said.
The Cypriot economy accounts for barely 0.2% of the eurozone’s overall output. But there is concern within the euro bloc that a default by Cyprus risks undermining the progress being made in Greece.
Cyprus is the fifth country to receive eurozone assistance since the bloc’s financial crisis began to unfold in earnest nearly three years ago.
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The European Commission has said Spain, France and Portugal have failed to cut overspending to agreed targets.
Spain’s government deficit was 10.2% of the country’s economic output in 2012, well above the agreed 6.3% target, and will stay far above target into 2014.
Meanwhile, the Commission joined other major international organizations in admitting that the eurozone economy would contract in 2013.
It is forecast to shrink 0.3%, making the governments’ task even harder.
Previously, the Commission had expected the 17 economies in the eurozone would collectively enjoy 0.1% positive growth this year.
Delivering its winter forecast, Commission Vice-President Olli Rehn said that the eurozone was nonetheless expected to rebound in the last three months of this year, registering 0.7% growth in the fourth quarter.
The Commission is concerned about a “surprise” fall in Portugal’s economy, which fell 3.2% in 2012 and is forecast to contract by another 1.9% in 2013.
The European Commission joined other major international organizations in admitting that the eurozone economy would contract in 2013
Most economic forecasters have been revising down their European growth estimates, after the global economic recovery showed signs of faltering in the final quarter of 2012.
For example, in January the International Monetary Fund (IMF) said it expected the eurozone to fall into “mild recession” in 2013, having previously predicted growth.
It also predicted that the UK would grow 1% in 2013, compared with the 1.1% previously forecast.
The World Bank also revised down its global growth forecasts earlier in January.
But European Central Bank (ECB) president Mario Draghi believes the eurozone will begin recovering in the second half of this year.
And this week, Germany’s Bundesbank said Europe’s biggest economy would avoid recession and return to growth in the first quarter of 2013, after shrinking 0.6% in the last three months of 2012.
It expects Germany to continue growing throughout 2013.
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Greek parliament has narrowly backed a fresh round of austerity measures, despite violent protests across the country.
The austerity package aimed at securing the next round of bailout funds was passed with 153 MPs in favor – a majority of just three.
The 13.5 billion-euro ($17.3 billion) bill includes tax rises and pension cuts.
Earlier, riot police fired tear gas towards protesters when they were attacked with petrol bombs in Athens.
Prime Minister Antonis Samaras warned before the vote late on Wednesday that without the bailout Greece would run out of money this month and face “catastrophe”.
The austerity package – Greece’s fourth in three years – is meant to close the nation’s budget deficit, lower its huge debt burden and make its economy more competitive.
MPs must now pass a revised budget on Sunday before eurozone finance ministers meet next week to approve 31.5 billion euros in fresh loans from the European Union (EU) and the International Monetary Fund (IMF) that Greece needs to avoid imminent bankruptcy.
But the level of resistance on the streets is a reminder that implementing the latest tough measures will be extraordinarily difficult.
The crucial vote was held after a lengthy debate in the 300-strong parliament.
Greek parliament has narrowly backed a fresh round of austerity measures, despite violent protests across the country
Immediately after the bill was adopted, co-governing New Democracy and Pasok parties expelled seven lawmakers from their ranks for failing to back the package.
The adopted plan includes a two-year increase in the retirement age from the current average of 65, as well as salary cuts and labor market reforms, including cuts to holiday benefits, notice periods and severance pay.
Workers fear this will just make it easier and cheaper for them to be fired at a time when unemployment has already soared to 25% and a five-year recession means there are few job prospects.
“Many of these measures are fair and should have been taken years ago, without anyone asking us to,” Antonis Samaras said.
“Others are unfair – cutting wages and salaries – and there is no point in dressing this up as something else,” the prime minister said, adding that Greece was, nevertheless, obliged to take the measures.
Antonis Samaras has said that without this money, which will be used largely to recapitalize the country’s banks, the country will be bankrupt by 15 November.
Earlier on Wednesday, tens of thousands of protesters held a rally in Syntagma Square – outside the parliament building in the heart of the capital.
The protesters chanted: “People – don’t bow your heads!”
Some in the crowd held giant flags of Greece, Portugal, Italy and Spain – four of the eurozone’s most heavily-indebted states.
The riot police – who sealed off parliament – later fired tear gas after the demonstrators attacked them with petrol bombs and flares.
Protests also took place in other big cities across Greece.
The Greek unions were staging what they described as the “mother of all strikes” – a 48-hour walkout which culminated on Wednesday.
The third major strike in just two months brought public transport to a halt and shut schools, banks and government buildings.
Measures in austerity package
- Retirement age up from 65 to 67
- A further round of pension cuts, of 5-15%
- Salary cuts, notably for police officers, soldiers, firefighters, professors, judges, justice officials; minimum wage also reduced
- Holiday benefits cut
- 35% cut to severance pay
- Redundancy notice reduced from six to four months.
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Greece’s Prime Minister Antonis Samaras is expected to repeat his plea for more time to implement reforms when he meets French President Francois Hollande.
The talks in Paris come a day after Antonis Samaras asked for his country to be given “breathing space” during talks with German Chancellor Angela Merkel.
Angela Merkel said she wanted Athens to remain in the eurozone but expected it to stick to the tough bailout terms.
The French leader is now likely to echo that message, correspondents say.
Angela Merkel and Francois Hollande met on Thursday to discuss Greece and urged Athens to stick with the tough reforms.
Greece’s Prime Minister Antonis Samaras is expected to repeat his plea for more time to implement reforms when he meets French President Francois Hollande
On Greece, the two leaders seem to be on the same page.
In Paris, Antonis Samaras is expected to call for more time to reduce the deficit, given the worse-than-expected recession and months lost this year due to elections, our correspondent says.
He adds that the Greek government is under pressure to win a concession from Europe so as to placate this tired nation and lessen the likelihood of a destabilizing period of social unrest.
After Friday’s talks with Angela Merkel in Berlin, Antonis Samaras said: “Greece will stick to its commitments and fulfill its obligations. In fact, this is already happening.
“We’re not asking for more money,” he said, adding that Greece needed “time to breathe”.
The International Monetary Fund (IMF), the European Central Bank (ECB) and the European Commission – the group of donor bodies known collectively as the “troika” – are examining whether Greece is making sufficient progress towards reforming its public finances.
Greece’s continued access to the bailout packages depends on a favorable report from the trio, and an official report is due to be released next month.
Greece is currently trying to finalize a package of 11.5 billion euros ($14.4 billion) of spending cuts over the next two years.
It is also being asked to put in place economic and structural reforms, including changes to the labor market and a renewed privatization drive.
The measures are needed to qualify for the next 33.5 billion-euro installment of its second 130 billion-euro bailout.
Greece needs the funds to make repayments on its debt burden. A default could result in the country leaving the euro.
Antonis Samaras is seeking an extension of up to two years for the necessary reforms, in order to provide Greece with the growth needed to improve its public finances.
Spain’s decision to request a loan of up to 100 billion Euros ($125 billion) from eurozone funds to help shore up its struggling banks has won broad support.
The International Monetary Fund (IMF) said the bailout was big enough to restore credibility to Spain’s banks.
Washington welcomed the measure as a vital step towards the “financial union” of the eurozone.
The move was agreed during emergency talks between eurozone finance ministers on Saturday.
IMF managing director Christine Lagarde said the plan for Spain should provide “assurance that the financing needs of Spain’s banking system will be fully met”.
“I strongly welcome the statement by the Eurogroup, which complements the measures taken by the Spanish authorities in recent weeks to strengthen the banking system,” she said.
“The IMF stands ready, at the invitation of the Eurogroup members, to support the implementation and monitoring of this financial assistance through regular reporting.”
Spain's decision to request a loan of up to 100 billion Euros ($125 billion) from eurozone funds to help shore up its struggling banks has won broad support
US Treasury Secretary Timothy Geithner welcomed the latest moves as “important for the health of Spain’s economy and as concrete steps on the path to financial union, which is vital to the resilience of the euro area”.
France’s Finance Minister Pierre Moscovici said the deal would “contribute to restoring confidence in the eurozone”.
The president of the European Commission, Jose Manuel Barroso, said he was confident that through bank restructuring and other reforms, Spain could gradually regain the confidence of investors and create the conditions needed for sustainable growth and job creation.
Earlier, Spanish Economy Minister Luis de Guindos announced that his country would shortly make a formal request for assistance.
Luis de Guindos said the help would be for the financial system, not the economy as a whole.
“This is not a rescue,” he said.
He also said the aid would not come with new austerity measures attached to the economy. Spain has already imposed strict economic reforms in a bid to tackle its debt problems.
The loan will bolster Spain’s weakest banks, left with billions of Euros worth of bad loans following the collapse of a property boom and the recession that followed.
Some banks borrowed large amounts on the international markets to lend to developers and homebuyers, a riskier strategy than funding it with deposits from savings.
The exact amount that Spain will receive will be decided after the completion of two audits of its banks, due to be completed by the end of June.
The money will come from two funds created to help eurozone members in financial distress – the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM), which enters into force next month.
Investors have recently demanded higher and higher costs to lend to Spain, making it too expensive for the country to borrow the money needed for a bank rescue from the markets.
Spanish Economy Minister Luis de Guindos has dismissed talk of it seeking a bailout from the International Monetary Fund (IMF) as “senseless”.
And the IMF denied that Spain had asked to discuss rescue loans.
The IMF has contributed to bailouts of all the other eurozone nations, such as Greece, that needed help.
Meanwhile, the European Central Bank (ECB) president Mario Draghi described the current set-up of the eurozone as “unsustainable”.
There were rumors that Spain had already gone to the IMF, after the Spanish deputy prime minister went to meet the IMF’s managing director Christine Lagarde.
Spanish Economy Minister Luis de Guindos has dismissed talk of it seeking a bailout from the IMF as senseless
“My desire is to not come out and deny these rumours because they are senseless,” Spanish Economy Minister Luis de Guindos said on Spanish television.
Spain has taken Greece’s place as the epicentre of the eurozone crisis as concerns over the health of Spanish banks have shaken markets.
Bankia, Spain’s fourth largest bank, has asked for another 19 billion Euros recently from Madrid, but many question whether Spain will be able to afford it.
Speaking to the European Parliament, Mario Draghi said: “Can the ECB fill the vacuum of lack of action by national governments on fiscal growth? The answer is no. Can the ECB fill the vacuum of the lack of action by national governments on the structural problem. The answer is no.
“The next step… is to clarify what is the vision a certain number of years from now. The sooner this is specified, the better it is.”
And EU economics commissioner Olli Rehn said more austerity was needed if the eurozone was to avoid disintegration.
Olli Rehn talked down the idea of European states issuing joint bonds, saying that austerity and closer co-operation were needed.
“We need a genuine stability culture and a much upgraded common capacity to contain common contagion,” he told a conference.
New figures also showed eurozone inflation slowed more than expected this month.
Inflation in the 17 countries that use the euro eased to 2.4% in May from 2.6% in April.
The figure is still above the ECB’s target to keep inflation below 2%, but the lower-than-expected number could fuel calls for an interest rate cut next week.
In other figures released on Thursday, Germany’s unemployment rate fell below 7% as Europe’s biggest economy continued to perform strongly.
The jobless rate dropped to 6.7% in May, from 7% in April, as the number of people unemployed fell by 108,000 to 2.86 million.
However, there was more bad news from Greece as figures showed that Greek retail sales volumes fell by 16.2% in March compared with a year earlier. This followed February’s decline of 12.9%.
French magistrates have asked for a new investigation into alleged rape involving former IMF chief Dominique Strauss-Kahn.
The magistrates in Lille are already investigating DSK over his suspected role in a prostitution ring.
A Belgian prostitute has alleged that Dominique Strauss-Kahn and three of his associates gang-raped her in Washington DC in December 2010, French media report.
Prosecutors are now considering whether to expand the current investigation.
French magistrates have asked for a new investigation into alleged rape involving former IMF chief Dominique Strauss-Kahn
A second Belgian prostitute has partially confirmed the witness statement alleging gang rape in Washington, but neither has sought to press charges.
Last year DSK abandoned plans to run as the Socialist candidate for the French presidency after he was accused of attempted rape in New York.
Although the criminal case against him was dropped, the affair sank his hopes of becoming president and forced him to resign as head of the International Monetary Fund (IMF).
In March 2012, DSK was also placed under formal investigation in France over alleged involvement in a prostitution ring.
DSK has admitted attending parties where the authorities believe prostitutes were provided by a gang, but denies knowing that they were prostitutes.
The three associates named in the Lille investigation along with DSK are businessmen Fabrice Paszkowski and David Roquet and policeman Jean-Christophe Lagarde.
The alleged Washington incident also concerns all four.
There has been no comment yet from Dominique Strauss-Kahn or his lawyers about the latest allegation.
A prosecutor can either dismiss the allegation or order a preliminary inquiry to establish if there is enough prima facie evidence to expand the original investigation, the AFP news agency reports.
Romania’s centre-right government led by PM Mihai Razvan Ungureanu lost a confidence vote today after 78 days of governing.
The no-confidence bill was filed by the liberal and centre-left opposition (USL) and won 235 votes in the 471-seat chamber, while the government was backed by only got 9 lawmakers. It is for the second time parliament has dismissed a government since the fall of Communism in 1989.
Romania's centre-right government lead by PM Mihai Razvan Ungureanu lost a confidence vote today after 78 days of governing
The issue at stake were cuts to wages and pensions aimed at scrapping some of the imbalances in the system and requested by the International Monetary Fund (IMF).
President Traian Basescu will nominate a new prime minister who must then win parliament’s approval.
Opposition leader Victor Ponta welcomed the vote saying it marked the end of “an abusive system that uses any weapon possible”.
“Today there was justice,” he said.
