In Brief
Papademos says aid package must tackle root of problem BRUSSELS (Reuters) – The financial aid package for Greece must tackle the root causes of the country’s economic weaknesses, European Central Bank (ECB) Vice President Lucas Papademos said yesterday. Greece requested emergency aid from its fellow eurozone members and the International Monetary Fund on Friday and is currently deep in talks with the European Union, the IMF and the ECB on the terms of the deal. Papademos, a former head of the Bank of Greece, said financial market pressures on the country had intensified despite its promises to clean up its public finances and support for the reforms from European Union policymakers. «It is essential that the economic program currently being prepared by the European Commission, the ECB and the IMF along with the Greek authorities specify comprehensive fiscal measures and structural reforms that will address the root causes of Greece’s fiscal imbalances and structural weaknesses so as to ensure the sustainability of its public finances and improve the country’s international competitiveness,» Papademos told a European Parliament committee. He urged all eurozone countries to stick to EU budget rules, warning that fiscal imbalances were not expected to see a discernible improvement until 2011-12. He also warned that some fiscal repair plans did not have enough detail or were based on overoptimistic assumptions. Greece’s lenders may run out of collateral, says Citigroup Greece’s banks may run out of the collateral used to obtain funding from the European Central Bank as Greek sovereign debt falls in value, according to Citigroup Inc chief economist Willem Buiter. Greek banks probably get most of their short-term funding from the ECB, using mainly Greek sovereign debt as collateral, Buiter wrote in a report yesterday. When the value of the state debt falls on the secondary market, the decline in the mark-to-market value of the collateral may trigger margin calls – or demands for more collateral, Buiter said. «Eventually the Greek banks could run out of additional collateral acceptable to the ECB/Eurosystem,» Citigroup said. «Their funding needs are likely to be exacerbated by a withdrawal of deposits that could become a run.» Greece’s economic crisis has raised funding costs for Greek banks and forced them to borrow from the ECB rather than on the market. The ECB said on March 25 that it would extend emergency lending rules, adding that Greek bonds won’t be cut off from ECB refinancing operations next year. The bank had been scheduled to reintroduce pre-crisis rules at the end of 2010, which sparked concerns over the Greek banks’ abilities to raise funding. (Bloomberg) New platform Danish investment bank Saxo Bank has launched a new stock-trading platform for Greek investors which it expects to help double its local customer numbers in the next two years, it said yesterday. The trading platform allows customers to trade more than 11,000 shares from 23 of the world’s largest equity markets, access financial data on listed companies and offset risk by buying derivatives products. The platform does not allow subscribers to invest in Greek stocks but investors can take positions in derivative products on local equities, called contract for difference (CDF) trading.
