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Europe

Markets rally on Papandreou’s Berlin visit

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Text by News Wires

Latest update : 2011-09-28

Angela Merkel welcomed Greek Prime Minister George Papandreou to Berlin Tuesday as his parliament pushed through further austerity measures, prompting a bounce in global markets as the indebted country looked set to receive further EU aid.

AP – The leaders of Germany and Greece met in Berlin on Tuesday, buoying stock markets around the world with hopes they were finally preparing a comprehensive solution to the European debt crisis.

Greece must receive an €8 billion ($11 billion) rescue loan before mid-October to stave off bankruptcy, a collapse that would send shock waves through financial markets in Europe and the world. But creditors have demanded more efforts to raise revenue.

In response, Greek lawmakers approved a controversial new property tax Tuesday evening, passing it 154 votes to 143 against in the 300-member parliament.

Chancellor Angela Merkel’s government downplayed speculation of bold new moves ahead of her meeting Tuesday with Greek Prime Minister George Papandreou but the simple gathering itself buoyed spirits in financial markets.

The current plan is to have Greece implement painful debt-reduction measures in exchange for rescue loans. Greece relies on funds from last year’s €110 billion ($149 billion) package, and European leaders have also agreed on a second €109 billion bailout, although some details of that remain to be worked out.

Greeks on strike over controversial new property tax

Greek Finance Minister Evangelos Venizelos said his country will get the money. “The disbursement will be decided in time, in line with the course of our funding needs,” he said Tuesday.

Speaking over chants from protesting ministry employees and tax office workers outside his department, Venizelos said Greek had made great efforts to achieve its fiscal targets, but that a “hyper-effort” was necessary to fully meet its commitments.

Experts, however, say the current course of austerity is untenable.

There is growing speculation in the markets that Greece’s bailout creditors will look to impose bigger losses on Greece’s private bondholders as well as recapitalizing Europe’s banks and boosting the size of the eurozone’s rescue fund. Talk of such a comprehensive package has helped turn sentiment around in stock markets this week following last week’s turmoil.

So far, there’s been no confirmation from Europe’s capitals that such a comprehensive solution is being planned.

Venizelos said representatives from the International Monetary Fund, European Commission and European Central Bank will return to Athens this week. The so-called troika suspended their review in early September amid talk of missed targets and budget shortfalls.

In Berlin, Papandreou told a conference of the Federation of German Industries that “we are borrowing to repay” – but also stressed that Europe needs to show it can get its act together.

“I can guarantee that Greece will live up to all its commitments,” Papandreou said ahead of the evening meeting with Merkel.

IN DEPTH

The Greek government recently announced new austerity measures, including pension cuts and tax hikes.

The new property tax will be charged through electricity bills to make it easier for the state to collect, instead of going through Greece’s unwieldy and inefficient tax system. Those who refuse to pay risk having their power cut off.

But the extra charge has deeply angered Greeks, who have already been through more than a year of sharp austerity that has seen salary and pension cuts and increased taxes across the board. State electricity company unionists have threatened not to collect the tax.

Speaking before the vote, Venizelos acknowledged the new tax was harsh on some, but stressed the government had no choice but to impose it as it fought to reduce its budget deficit.

“Clearly there will be categories of people who will not be able to pay this housing charge and this is a situation that will be resolved,” he said. “But the most important thing is that we achieve the targets agreed to in 2011 and 2012.”

Greeks have been outraged by the new measures after a year of austerity, and unions have responded with strikes and protests. Public transport workers walked off the job Tuesday for two days, and were to be joined by taxi drivers on Wednesday. Tax office and customs workers were also on strike.

 

 

Date created : 2011-09-27

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