Greece Said to Face Earlier Asset-Sale Deadline to Win Fresh Loan Package
By James G. Neuger - May 23, 2011 2:23 PM GMT+0200
Mon May 23 12:23:08 GMT 2011
Greece faces European pressure to sell 15 billion euros ($21 billion) of state assets by the end of 2012, a year ahead of schedule, in order to win a new three- year loan package, a person familiar with the talks said.
Greece would also need to outline new deficit cuts to persuade European governments and the
International Monetary Fund to offer loans on top of last year’s 110 billion-euro package, said the person, who declined to be identified because the negotiations are in progress.
Greek 10-year bond yields rose to a euro-era high today and the cost of default insurance hit a record, dramatizing the need for follow-up aid. Greek Prime Minister
George Papandreou’s Cabinet today began outlining a fifth austerity package since last year’s European-led rescue made Greece the first of three countries to tap official aid to escape default.
The bond slump “is partly down to concern that policy makers will be unable to come up with any concrete solution to the debt crisis,” said John Davies, a fixed-income strategist at WestLB AG in London. “There’s a growing realization that a pain-free solution for Greece may not be there.”
So far, Papandreou has set an end-2013 deadline to reach 15 billion euros in state asset sales, with the goal of upping the figure to 50 billion euros by the end of 2015.
A Greek Finance Ministry spokesman didn’t immediately respond to an e-mailed request for comment on the asset-sale plan.
Greek 10-year yields soared as much as 43 basis points to 17 percent today. The extra yield over German bonds, a measure of the risk of investing in Greece, widened by 48 basis points to 14 percentage points.
Asset-Sale Agency
Requiring Greece to set up a special agency to manage the asset sales “is one option we’re exploring among several options,” European Union Economic and Monetary Commissioner Olli Rehn said in Vienna today.
The use of state holdings or asset-sale revenue as collateral, as sought by countries including Finland, probably won’t work because that would rule out using that money to pay down debt, the person close to the talks said.
Euro-area governments also want bondholders to buy new Greek bonds to replace maturing debt, stopping short of the debt extension, or “reprofiling,” floated by Luxembourg Prime Minister Jean-Claude Juncker last week, the person said.
Such a postponement of debt redemptions would be classified as a default, Fitch Ratings said last week when it cut Greece’s credit rating by three levels to B+.
Debt concerns propelled the euro to an all-time low against the Swiss franc today. The 17-nation currency dropped as low as 1.2349 francs. It fetched 1.2392 francs at 12:15 p.m. in
London.
