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EU making "rapid progress" towards loans to Greece

business Updated: Apr 28, 2010 19:07 IST
AFP
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Talks on emergency loans for debt-laden Greece are making "rapid progress," the EU Commission said on Wednesday, ruling out debt-restructuring as an option as Greek debt hit near-pariah status.

"The European Commission is making solid and rapid progress with the European Central bank, the International Monetary Fund and the Greek government," in talks with Athens aimed at activating a programme of loans, commission spokesman Amadeu Altafaj Tardio told reporters in Brussels.

The EU executive arm expects these talks "to be finalised in the coming days," the EU spokesman added.

EU leaders and the International Monetary Fund have already agreed in principle to offer Athens 45 billion euros (60 billion dollars) this year, as part of a three-year programme.

They must first satisfy themselves that Greece's request for help is justified, after which the eurozone leaders will have to give the formal green light for the loans to begin.

Eurozone leaders are set to hold an extraordinary summit in Brussels on May 10, hoping to give approval for the loans after months of talks and Berlin reticence ahead of key German regional elections on May 9.

Altafaj repeatedly stressed that restructuring Greece's debt -- which means losses for holders of its bonds -- was not an option.

"Debt restructuring in a euro area member state is not an option. And this is not going to be part of the joint programme that is being discussed currently in Athens," he insisted.

His comments came after several German parliamentary deputies voiced the possibility of Greek debt restructuring as an option although on Wednesday the German government categorically excluded it.

The idea has been mooted as a top German economist warned that Berlin could probably wave goodbye to any money it might provide to debt-wracked Greece.

Amid growing opposition to the huge spending cuts, Greece's efforts to meet a May 19 deadline to repay nine billion euros (12 billion dollars) in debt took a critical new blow when the Standard and Poor's ratings agency downgraded its debt to "junk" status on Tuesday.

The EU Commission reacted by calling on rating agencies to act "in a responsible way" after that downgrade shattered what remained of investor confidence in Greece.

"We would expect that when credit rating agencies assess the Greek risk, they take due account of the fundamentals of the Greek economy and the support package prepared by the ECB, IMF and European Commission," said Chantal Hughes, the EU executive arm's spokeswoman on financial services.

"It's not up to the commission to say whether the rating given by any one credit rating agency is correct or not. What we can say is that we have full trust in Greece and action being taken," she said.

"We of course expect that credit rating agencies, like other financial players, and in particular during this difficult and sensitive period, act in a responsible and rigorous way," the EU Commission spokeswoman added.

Standard & Poor's lowered its long-term sovereign credit ratings to BB+ from BBB+ and its short-term ratings to B from A-2.

The downgrade means certain investors will no longer be allowed to buy Greek debt and it could also curb Greece's access to vital European Central Bank funds.

Fellow EU Commission spokesman Amadeu Atafaj was dismissive of the rating agency which warned investors off backing Greece.

"Who is Standard & Poor's by the way?" he asked rhetorically.

A major reason for the sudden European urgency over Greece's woes is that the threat of contagion throughout the eurozone, which many critics have said was a strong possibility appears to be coming true.

Portugal struggled Wednesday to convince investors that the Greek debt drama had not reached its shores after Standard & Poor's also downgraded its credit rating, sending the country's financial markets into a tailspin.

Meanwhile, stocks plunged and the euro hovered at one-year lows against the dollar Wednesday in volatile markets.