ECONOMY

Talks on EU-IMF aid well advanced

Talks involving the European Union and the International Monetary Fund on the new conditions to be demanded of Greece in order for it to be granted billions of euros in rescue loans are well advanced, the head of the group of eurozone finance ministers said yesterday. Luxembourg Prime Minister and head of the Eurogroup Jean-Claude Juncker said preparations were «advancing at a satisfactory rhythm» after ministers from the 16 nations that share the single currency met informally in Madrid. All 15 of Greece’s euro partners have agreed to contribute in the event that 30 billion euros in loans at below-market rates of around 5 percent interest are called upon by Athens, a contingency for which the Greek government is preparing. «Preparatory work among euro-area member states is advancing at a satisfactory rhythm, as are the discussions with the International Monetary Fund, as regards the joint program of assistance,» said Juncker. He was referring principally to conditions expected to trigger further budget cuts or tax hikes after 4.8 billion euros’ worth of austerity measures were announced by the Greek government last month. On Thursday, Greece said that it wants to begin preparatory talks on an international rescue aid package but added that this does not mean that it will activate the support mechanism. Investors continue to be unsure about Greece’s financial health, which is keeping funding costs high. The spread between the 10-year German Bund yield and its Greek equivalent rose to 418 basis points, yesterday, from 399 bps on Thursday. Meanwhile, data yesterday showed that Greece’s cash deficit shrank 10.6 percent year-on-year in the first quarter of 2010, meaning lower net borrowing needs. The Bank of Greece, the country’s central bank, said the government’s cash deficit fell to 5.67 billion euros from 6.35 billion in the same period a year earlier. It said the budget’s primary deficit, which excludes debt-servicing costs, also narrowed to 2.92 billion euros from 3.73 billion in January-March 2009.