European officials attempting to fend off the euro area?s first sovereign default will try to settle remaining disputes today as they close in on a 130 billion-euro ($170 billion) Greek bailout.
Finance ministers meet in Brussels at 3.30 p.m., joining Greece?s prime minister, Lucas Papademos, who arrived on the eve of the gathering. Their talks on his country?s second bailout in two years will aim to reconcile demands made on Greek leaders, a debt swap among private creditors, the role of the European Central Bank and concerns the measures won?t bear fruit.
European leaders including German Chancellor Angela Merkel want to wrest the common currency out of its crisis amid signs of improvement in the global economy. Focus has returned to Greece as the threat of economic collapse and exit from the euro has stoked officials? concern such a scenario may provoke chaos.
?I don?t think there will be a majority to go down any other avenue? than a Greek bailout, Austrian Finance Minister Maria Fekter told state broadcaster ORF yesterday. Asked whether ministers will reach agreement, she said: ?it looks like it.?
Should ministers fail to back the bailout package at their Brussels meeting, the issue could be pushed off to the next European Union summit on March 1. A disrupted schedule would threaten to spark unease among investors and reverse a decline in bond yields in indebted nations such as Italy and Spain.
Italian bonds rose for a sixth week last week, the longest run of gains since August 2006. The euro has climbed 1.6 percent against the US dollar since the beginning of the year. In contrast, the yield on Greece?s 2022 bond climbed 60 basis points to 33.98 percent on February 17.
?Deadlines are shifted and there is scope for events to disappoint,? Neil MacKinnon, a global macro strategist at VTB Capital in London and a former UK Treasury official, wrote in a note to clients yesterday.
Merkel, Papademos and Italian premier Mario Monti on February 17 expressed confidence that ministers will resolve open questions, and Papademos flew to Brussels yesterday to facilitate discussions. International Monetary Fund Managing Director Christine Lagarde will also participate in the finance ministers? talks, according to fund spokesman Gerry Rice.
?A euro exit by one member could fundamentally change the nature of the euro as an irreversible currency and spark an unprecedented run on banks and sovereigns,? Joachim Fels, chief economist at Morgan Stanley, wrote in a note to clients yesterday. [Bloomberg]