Financial Times
July 4, 2011
When Greece passed a €28bn austerity package last week, it appeared that months of infighting had come to an end: Athens would get its next aid payment, avoiding sovereign default, and the European Union would sign off on a second, €120bn bail-out to keep Greece solvent through 2014.
But only one of those things is now assured: the €12bn July aid payment is expected to be finalised by the International Monetary Fund on Friday. The second Greek rescue is now being held up by what one senior European official called “an impossible knot” – getting private holders of Greek bonds to help pay for the bail-out, but without the financial markets judging the plan to be a default on Greece’s debt commitments.
Standard & Poor’s made clear on Monday that clearing the default hurdle could, for them, be an impossible knot indeed, warning that the most prominent French-backed plan for bondholder participation would force them to declare a default.
New figures published by the European Commission make clear just how big Greece’s budgetary hole now is. Over the next three years, the Commission says Greece will need €172bn in financing. But the current bail-out only has another €57bn left – meaning €115bn has to be found.
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