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Greece faces auditors’ verdict

Sept. 29, 2011 - 15:21 By
ATHENS (AFP) ― International auditors headed for Greece and Germany’s parliament prepared for a crucial vote on boosting the eurozone rescue fund Thursday, but discord over the debt crisis unnerved global markets.

Greece’s global creditors announced their auditors would return to Athens, four weeks after they quit the country abruptly, unhappy with the government’s efforts to tackle its debt mountain.

The announcement came a day after Greek Prime Minister George Papandreou’s impassioned appeal to German politicians and businessman in Berlin, where he said his country was making a “superhuman effort” to tackle the problem.

At stake is billions of euros in blocked bailout loans from the European Union and International Monetary Fund, which Athens needs to avoid default.

EU and IMF negotiators will resume their talks with Greek’s leadership on Thursday, amid mounting social tension and what the European Union describes as the biggest challenge of its history.

The leaders of the United States and Germany have exchanged barbs over the crisis, each calling on the other to assume their responsibilities.

German Chancellor Angela Merkel has suggested a second Greek bailout may even need to be renegotiated.

Berlin, Paris and the European Central Bank are also at odds over how much Europe’s banks should lose in the event of a default, which would require massive recapitalization of bankruptcy-threatened lenders.

“This sort of in-fighting amongst Europe’s leaders will only serve to undermine the recent rally in shares and the euro, underlining the importance of the audit’s findings,” said Moneycorp in a note to investors.

European stocks fell amidst the disarray, with London, Paris and Frankfurt all closing down Wednesday.

Asian markets were mostly lower Thursday following weak leads from Wall Street and the euro was range bound against other major currencies in Asia, as investors stayed cautious ahead of the German vote.

European Commission president Jose Manuel Barroso defied divisions within the EU and pushed two controversial measures in his annual “state of the union” address to the European Parliament in Strasbourg.

He advocated a joint eurozone bond deeply opposed by Germany and an EU-wide financial transaction tax rejected by Britain.

“Once the euro area is fully equipped with the instruments necessary to ensure both (economic policy) integration and discipline, the issuance of joint debt will be seen as a natural and advantageous step for all,” he said.

The ‘stability bonds’ will be “designed in a way that rewards those who play by the rules and deters those who don’t,” he said, adding that the Commission would issue proposals in the coming weeks.

To ward off future debt crises, the European parliament on Wednesday adopted stiffer budget rules armed with the threat of fines against governments with runaway deficits and debts.

As Greece waits for the funds from a first 110-billion-euro ($150 billion) bailout approved last year, a few eurozone states have yet to sign off on a second 159-billion-euro Greek rescue package that was agreed in July.

German lawmakers vote on Thursday on expanding the scope and size of the EU’s current rescue fund ― the European Financial Stability Facility (EFSF).

It has already helped rescue Ireland and Portugal and will be tapped for Greece’s second bailout.

Finland’s parliament finally approved changes to the fund on Wednesday, despite deep-rooted reluctance there to bailing out eurozone strugglers.

But another seven of the 17 eurozone states still have to approve the measure.

Even if auditors decide the Greeks are doing enough to merit more financial aid, eurozone partners and the International Monetary Fund will still have to sign off on the money.

Finance ministers meet on Monday in Luxembourg, but EU economic affairs spokesman Amadeu Altafaj indicated that the talks in Athens would not be concluded in time for a decision by then.

The head of the German banking federation criticized talk that eurozone governments may now push private holders of Greek government bonds to accept losses of 50 percent instead of 21 percent as agreed in July.

“If governments now unravel the deal that was reached on private-sector involvement, then the loss in confidence for the financial markets would more than negate the benefits of any such action,” Andreas Schmitz told the German daily Bild.

A Greek government spokesman said the country would escape default.

“We are not far from securing (the loan tranche). One by one, pending issues are settled,” deputy government spokesman Angelos Tolkas told Flash Radio.

Greek austerity measures have met fierce resistance and Athens was again paralyzed by a transport strike Wednesday, with police again using tear gas, ahead of protests by pensioners, municipal workers and students.