Euro-zone finance ministers ended a conference call over a new bailout and debt restructuring for Greece late Wednesday with their chairman expressing optimism that a long-awaited accord could be wrapped up soon.
Jean-Claude Juncker, the Luxembourg prime minister who chairs the ministers' meetings, said there had been "substantial further progress" since yesterday in negotiations between Greece and its so-called troika of international official lenders--the European Union, the International Monetary Fund and the European Central Bank.
In a statement after the call, Mr. Juncker said the lenders had received assurances of support for the austerity program that will accompany the deal from the two party leaders in Greece's ruling coalition--New Democracy leader Antonis Samaras and Socialist party George Papandreou--and said EUR325 million of additional budget cuts for this year had been identified, as required by the lenders.
But he said further moves were necessary before agreement could be sealed: measures to make sure the agreed economic reform program was implemented and to ensure that servicing the debt would be a priority for Greece.
Earlier Wednesday there were new signs of concern as the euro-zone economy shrank in the fourth quarter of 2011 as nine member states posted a fall--five of which entered a recession--raising concerns the wider region will follow.
Data from European statistics agency Eurostat on Wednesday showed that gross domestic product across the 17 regions that share the euro contracted 0.3% in the final quarter of 2011 compared with the third, and grew 0.7% compared with a year earlier.
That is the first quarterly contraction since a 0.2% drop in the second quarter of 2009, while the year-to-year gain is the smallest since the fourth quarter of 2009 when GDP shrank 2.1%. And, for the whole of 2011, Eurostat calculates GDP grew 1.5%, down from 1.9% growth in 2010.
Meanwhile, the Bank of England left open the possibility of further stimulus for the U.K. economy after its latest forecasts showed inflation is likely to remain below its 2% target for the next two years.
5:15 pm | Euro Zone Shows Optimism on Greek Aid | by Riva Froymovich, Matina Stevis and Stephen Fidler
Euro-zone finance ministers ended a conference call over a new bailout and debt restructuring for Greece late Wednesday with their chairman expressing optimism that a long-awaited accord could be wrapped up soon.
5:11 pm | Venizelos: Greece Has Met Prior Actions Needed For Loan Deal | by Stelios Bouras
Greek Finance Minister Evangelos Venizelos said that Greece has met prior actions demanded by international creditors in exchange for further aid and that an announcement on a debt write-down plan could be made early next week. Speaking to journalists after a conference call with euro-zone finance ministers, Mr. Venizelos said issues regarding political pledges to Greece's reform program have been resolved, along with how to fill a EUR325 million budget gap for 2012. "There are other issues, technical issues, relating to the framework we are operating in. These will be prepared in a euro working group on Sunday in Brussels, so that a final decision can be taken regarding the program's approval and for the public announcement of the PSI [private sector involvement] Monday," he said, referring to a bond swap program which is a crucial part of Greece's second bailout package.
3:50 pm | Juncker: Confident Eurogroup To Make Needed Decisions Feb. 20 | by Riva Froymovich and, Matina Stevis
Euro-zone finance ministers are set to take the decisions linked to Greece's second bailout and private-debt restructuring at their meeting in Brussels on Monday, February 20, the head of their group said in a written statement Wednesday. Eurogroup President Jean Claude Juncker said Athens had taken the necessary steps to open the way to close the deal, including identifying EUR325 million of cuts in its 2012 budget and providing written assurances by its two main political leaders. "We received the strong assurances provided by the leaders of the two coalition parties in Greece's government," Mr. Juncker said in his statement, which followed a teleconference among the 17 finance ministers of the common-currency bloc. He added that Greece had completed the required steps with officials from its troika of lenders--the European Union, the European Central Bank and the International Monetary Fund--to identify "the required additional consolidation measures of EUR325 million and the establishment of a detailed list of prior actions together with a timeline for their implementation." Mr. Juncker said that, "on the basis of the elements that are currently on the table and the above-mentioned additional input, I am confident that the Eurogroup will be able to take all the necessary decisions on Monday 20 February."
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1:08 pm | Belgium Government Mulls Further Budget Measures | by Frances Robinson
Belgium's government is bracing itself for planning a further round of budget savings, the budget minister said Wednesday, as it grapples with pressure from the European Union to meet its fiscal targets and worsening economic forecasts.
"We're sticking to the goal as set out in the stability pact of the EU," which aims for the country to have a budget deficit of 2.8% of gross domestic product, budget minister Olivier Chastel said in a statement.
"There's a difference between budgetary control, which has already begun with bilateral meetings, and the conclave meeting."
The Bureau de Plan, the federal agency which issues the forecasts the government uses to draw up the budget, said last week it expects the country's economy to grow by just 0.1% in 2012, down from the 0.8% forecast used to draft the budget late last year.
The Belgian National Bank said Wednesday it expects a contraction of 0.1%, casting a further note of gloom over proceedings.
The first conclave meeting should take place on the morning of Feb. 26. Ministers hope to reach an agreement on the necessary measures by Mar. 4 at the latest.
"Resolute implementation and close monitoring are essential," National Bank Governor Luc Coene wrote in his foreword to the bank's annual report Wednesday.
"If there is any risk of failure to meet the target of cutting the deficit to 2.8% in 2012, then steps must be taken immediately to ensure sustainable fiscal consolidation."
It'll be the latest round of cuts for the heavily-indebted country, where the public debt-to-GDP ratio is just below 100%. Belgium shrank the initial budget by EUR11.3 billion through a combination of tax hikes and cutting public spending.
But the EU said last month this wasn't sufficient and, following further talks, an additional EUR1.3 billion spending freeze was put in place.
1:00 pm | Euro-Zone GDP Fall | by Brian Blackstone
Economic activity fell across much of the debt-plagued euro zone in the final quarter of 2011, with contractions stretching from fragile Greece to mighty Germany.
Euro-zone gross domestic product fell 0.3% in the fourth quarter of 2011 from the previous quarter, European Union statistics agency Eurostat said. That translates to a contraction of 1.3% at a seasonally adjusted annual rate, J.P. Morgan estimates.
"The debt crisis has thrown the euro zone recovery into reverse," said Martin van Vliet, economist at ING Bank. Still, the output decline was slightly less than economists had feared, suggesting Europe's downturn won't be as severe as the one the gripped the global economy in 2008 and 2009 after the collapse of Lehman Brothers.
For 2011 as a whole, euro-zone GDP grew 1.5%, down from 1.9% in 2010. Economists expect the euro bloc to stagnate this year or, at best, barely expand. Countries such as Italy, Spain, Portugal and Greece are taking drastic steps to reduce massive government debt loads by cutting spending and raising taxes. That effort is hampered by shrinking economies, which drain government coffers of tax revenue and increase social spending. For wealthier economies such as Germany and the Netherlands, weak economies at home could further dampen public willingness to support Greece and others with bailouts. The risk isn't confined to Europe. Other regions such as the U.S. are just starting to see stronger, jobs-filled recoveries while emerging markets are expected to post robust growth this year. If the euro zone, which accounts for about one-fifth of global GDP, falters, it could derail the global recovery. "It matters very much if the euro zone isn't growing," said Greg Fuzesi, economist at J.P.Morgan.
If there is a disorderly debt default in Greece and investors lose confidence in the ability of European policymakers to stem the crisis "then the spillovers could be great" to the rest of the world, Mr. Fuzesi said.
12:53 pm | European Stocks End Up Despite Greece Jitters | by Andrea Tryphonides
The Euro Stoxx 50 ends up 0.2% at 2493.96, retreating from the session high of 2520.78 on reports the release of Greece's bailout funds could be delayed.
"The market started to question whether Europe will actually save Greece, " says Duarte Caldas at IG Markets, Lisbon.
However, the reaction in equity markets has not been catastrophic. Traders are becoming tired of the constant tug of war between European officials and Greek lawmakers.
In addition, corporate earnings offer support. Heineken ends up 3.7%, Danone 1.9% higher and BNP Paribas up 4.1% after well-received results.
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