June 9, 2011
European governments and the International Monetary Fund would lend as much as an extra 45 billion euros ($65 billion) to Greece under an expanded plan to avoid the euro area’s first sovereign default, two people with direct knowledge of the talks said.
European estimates put Greece’s 2012-14 financing gap at as much as 170 billion euros, the people said. It would be filled by the loans, plus around 57 billion euros in unspent aid from last year’s bailout, roughly 30 billion euros in asset-sale proceeds and about 30 billion euros in rollovers by creditors.
Structuring the rollovers remains the most sensitive part of the package, with European Central Bank President Jean-Claude Trichet warning on a teleconference of euro-area officials yesterday that German calls for a debt exchange might lead rating companies to declare Greece in default, the people said.
“It’s hard to imagine something that’s truly voluntary in the current climate,” Bart Oosterveld, managing director for sovereign risk at Moody’s Investors Service, told reporters in Frankfurt today. “The default risks for peripheral European countries continue to increase.”
Greek bonds fell for third day and the price of insuring Greek debt against default reached a record as 5,000 public workers struck against the asset-sales and budget-cut plans demanded by Europe and the IMF as conditions for aid.
Chants of “no, won’t sell” rang out outside the Finance Ministry in Athens as Prime Minister George Papandreou’s Cabinet weighed the emergency plan, which includes the sale of stakes in Hellenic Postbank SA and Agricultural Bank of Greece (ATE) SA.
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