• 16:31
  • Tuesday ,04 October 2011

Eurozone delays decision on next Greek payout


International News


Tuesday ,04 October 2011

Eurozone delays decision on next Greek payout

 Eurozone finance ministers have delayed making a decision on giving Greece its next instalment of bailout cash, sending European shares down sharply.

It came after Greece said it would not meet this year's deficit cutting plan.
A meeting set for 13 October, when finance ministers had been expected to sign off the next Greek loan, has now been cancelled, said BBC Europe correspondent Chris Morris.
French shares fell 3.3%, German stocks by 3.2%, and the UK's FTSE by 2.4%.
As a result of the decision by finance ministers, Greece may not get its next loan tranche until November.
Greece has previously said it needed the money by mid-October to avoid defaulting on its loans, but Eurogroup chairman Jean-Claude Juncker said at a meeting of finance ministers in Luxembourg that the country would be able to meet its financial obligations as long as it received the next 8bn-euro (£6.9bn; $10.9bn) tranche of money in November.
Mr Juncker also ruled out the possibility of a debt default by Greece - denying rumours that some countries, including Germany, had been pushing for this.
The meeting also appeared to reach a deal to let Finland receive collateral as security for its contribution towards the eurozone bailout fund - the European Financial Stability Facility.
The Finns had threatened to block further bailouts to Greece unless it received this special arrangement.
Banking falls
Banking stocks were again among the biggest fallers, due to concerns about their exposure to Greek government bonds.
In France, Societe Generale was 7% lower, while BNP Paribas had lost 6.3%, and Credit Agricole had fallen 5.9%.
German's Commerzbank was down 5.7%, while in the UK Lloyds Banking Group had shed 4.2%.
Meanwhile, the Franco-Belgian bank Dexia, the bank the market judges most vulnerable to Greece, saw its shares tumble around a quarter to around 1 euro (86p).
The euro fell to a 10-year low against the yen and slipped against the dollar to $1.3144, a nine-month low.
Jane Foley, strategist at Rabobank, said: "The market is increasingly worried about the potential of the Greek crisis and the calamity that could be created if there was a messy default."
Falling sales
On Monday, Athens announced that the 2011 deficit was projected to be 8.5% of GDP, down from 10.5% in 2010 but short of the 7.6% target set by the EU and IMF.
The government, which on Sunday adopted its 2012 draft austerity budget, blamed the shortfall on a worsening economy, which is expected to contract by 5.5% rather than the 3.8% forecast in May.
Data released on Tuesday showed the effects of the austerity programme on household spending.
Greek retail sales fell 4.3% in the year to July, although the figure was far worse in June when sales were 11.4% lower year on year.
Inspectors from the International Monetary Fund (IMF), European Union (EU) and European Central Bank are currently in Athens to examine Greece's financial position.
'Unanimously approved'
The Greek finance ministry said on Sunday that its unpopular austerity measures would have to be adhered to.
It said: "Three critical months remain to finish 2011, and the final estimate of 8.5% of GDP deficit can be achieved if the state mechanism and citizens respond accordingly."
It released figures for 2012's projected deficit, putting it at 6.8% of GDP, also short of the 6.5% target.
The data came as the government met to approve Greece's draft budget for next year.
The cabinet meeting also approved a measure to put 30,000 civil service staff on "labour reserve" by the end of the year.
This places them on partial pay with possible dismissal after a year.
This measure, along with other wage cuts and tax rises, have been part of a package intended to persuade the so called "troika" of the EU, IMF and ECB to continue with the bailouts.
The Greek austerity measures are hugely unpopular at home and have led to a wave of strikes and protests.
Protestors again blocked the entrance to several ministries on Tuesday, including the Finance and Transport ministries.
Many Greeks believe the austerity measures are strangling any chance of growth.