Greek official presses financial rescue
Greek Finance Minister Evangelos Venizelos on Monday asked U.S. policymakers and business leaders for support as his country finalizes another rescue package to avoid a second default in recent years.
“I’m finding myself in a battlefield of debt, deficit and economic growth,” he said in a speech at the Peterson Institute for International Economics, a Washington think tank. “Together we will succeed in rebuilding our country.”
Greece last week announced another rescue package aimed at helping the country avoid a second default in recent years. Eurozone leaders held an emergency meeting in Brussels and decided to give Greece a bailout of about $155 billion. The deal, which involves the private sector, will give Greece more cash and easier loan terms.
“All of us together — the [International Monetary Fund], the [Institute of International Finance], the American government, the European Union, the European Central Bank — need to send a strong and clear message: We have a program, we trust in its implementation and its prospects, and we will collectively achieve our goals,” said Mr. Venizelos.
Mr. Venizelos met with Treasury Secretary Timothy F. Geithner, IMF Managing Director Christine Lagarde and leading members of Congress earlier in the day to discuss the issue. He said he expects Greece to return to positive growth and create surpluses by 2012.
But Greece can’t seem to catch a break from the credit agencies. On Monday, Moody's Investors Service cut the nation’s credit rating to the lowest level of any country in the world that it rates. Greece dropped three levels to “Ca,” and it appears imminent that it will soon drop one level to default.
That follows similar cuts from Fitch to “CCC” status last week.
Standard and Poor’s has also given Greece a “CCC” rating, but has not said how the new package will further affect its rating.
The credit agencies plan to take another look at Greece after the new deal is completed., and will likely downgrade it to default.
“The announced EU program, along with the Institute of International Finance’s statement implies that the probability of a distressed exchange, and hence a default, on Greek government bonds is virtually 100 percent,” Moody's said in a statement. “Once the distressed exchange has been completed, Moody's will reassess Greece’s rating to ensure that it reflects the risk associated with the country’s new credit profile, including the potential for further debt restructurings.”
The credit agencies don’t like how Greece is getting the private sector involved to the tune of $194 billion between now and 2020.
The IIF is hoping to persuade 90 percent of bondholders — something Mr. Venizelos calls an “ambitious” goal — to participate in an exchange plan that would delay payments. Moody's said the private sector is “now virtually certain to incur credit losses.”
But Greece has been critical of the credit agencies for their downgrades, suggesting the country might end its subscriptions to the agencies.
“All governments pay a subscription to these agencies,” Greek government spokesman Elias Mossialos told reporters. “We, I think, do not need the reviews anymore. They have no practical value. Perhaps the Finance Ministry should end its subscription.”
Mr. Venizelos said this is a “historic challenge” for the Greek people, and they will need American support to succeed.
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