European Union nations are working on a contingency rescue plan for Greece to be funded by European governments, according to two people briefed yesterday in Berlin by an E.U. official.
“We’re telling financial markets: Look out, we’re not abandoning Greece.”
The briefing, coming the day Greece sold 5 billion euros ($6.8 billion) of bonds, underscores the balancing act facing European officials as they prod Greek Prime Minister George Papandreou to cut the biggest EU budget deficit without their committing funds, Bloomberg News reports.
Papandreou today begins meetings in Luxembourg, Berlin, Paris and Washington after protesters besieged the Greek Finance Ministry to denounce tax increases and spending cuts.
“We’re telling financial markets: Look out, we’re not abandoning Greece,” Luxembourg’s Jean-Claude Juncker, who heads the group of euro-area finance ministers, told Germany’s Deutschlandradio Friday.
He praised Greece’s “ambitious” deficit-reduction plan and said “I don’t assume outside financial help will become necessary.”
In Greece, meantime, labor unions shut down transport today and state workers walked off the job in protest as parliament prepares to pass the austerity package.
Police scuffled with protesters and fired tear gas at demonstrators outside the parliament building during a protest march.
The Greek government succeeded yesterday to issue ten-year government bonds for five billion euros.
Interest rates, however, ended as high as 6.25% which is twice what the German government pays for its loans.
“Although we should not exaggerate this interest, since Greece will pay as much as 6.25 percent interest rate, we feel nevertheless that the Greeks passed the first acid test,” macro economist Shakeb Syed at the Norwegian Handelsbanken writes in a note to clients.