Bloomberg News

Troika Asked European Finance Ministers to Boost Greek Loan

February 12, 2012

(Updates with bank funding needs in second paragraph. For more on debt crisis, see EXT4.)

Feb. 11 (Bloomberg) -- European Union and International Monetary Fund officials proposed an extra 15 billion euros ($19.8 billion) in funds for the second Greek aid program at the Feb. 9 meeting of euro-area finance ministers, Greek Finance Minister Evangelos Venizelos said.

Officials from the so-called troika of the European Commission, IMF and European Central Bank proposed to increase funds to cover additional needs of Greek banks and provide the country with the means in 2015 for a deeper structural adjustment, Venizelos said today to lawmakers from his Pasok party in parliament in Athens.

“We discussed everything at the Eurogroup the day before yesterday,” he said. “The state of the economy, how much money will be needed, because there is always the fear that they have to go back to their parliaments and ask approval for an increase in the 130 billion euros.”

Venizelos said “the troika proposed an increase of at least 15 billion euros because the banks need more money, and their idea is for financing in 2015 too.”

The interim government of Prime Minister Lucas Papademos yesterday approved deeper budget cuts needed to secure a second package of aid, preparing the way for a vote in parliament tomorrow. The measures equal about 7 percent of gross domestic product over three years and Greece is also seeking a debt swap that would shave 100 billion euros off more than 200 billion euros of privately held debt.

Greece will issue 70 billion euros in new bonds as part of the debt swap, and 30 billion euros will be paid by funds from European partners to bondholders, Venizelos said. The public offer for the swap needs to be completed by Feb. 17 at the latest, Venizelos said at a committee hearing today.

The troika calculates that the extra cuts to pensions and wages that are a condition of the loan package will deepen the country’s recession by 0.4 percentage point this year and lead to a faster recovery from 2013, Venizelos said.

--Editors: Jonas Bergman, James Kraus

To contact the reporter on this story: Marcus Bensasson in Athens at mbensasson@bloomberg.net

To contact the editor responsible for this story: Maria Petrakis at mpetrakis@bloomberg.net


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