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EUROPE

German banks agree to help bail out Greece

German banks agreed Thursday with the German government to participate in a second debt rescue package for Athens by rolling over some of their Greek bonds, Finance Minister Wolfgang Schäuble said.

German banks agree to help bail out Greece
Photo: DPA

Schäuble said after a meeting in Berlin with senior representatives from German banks and insurers, that the agreement covered some €3.2 billion ($4.6 billion) in investments in Greek bonds due to expire before 2014.

The exact details, however, remain to be hammered out.

“I am confident that we will have a solution by (a meeting of eurozone finance ministers in Luxembourg) Sunday and then we’ll work further on the follow-up to the decisions over the coming weeks,” Schäuble said.

“I’m happy that the representatives of the financial sector have said they are ready to participate in a European package for a second aid programme for Greece,” he told reporters.

Josef Ackermann, chief executive of Deutsche Bank, said: “We are of the opinion that Greece must be helped … We are ready to do so.”

Ackermann said that the banks, which together hold around €20 billion in Greek assets, chose to follow the outline of a proposed deal with French banks announced by President Nicolas Sarkozy earlier this week.

That arrangement involved French banks agreeing for maturities on some Greek government bonds to be extended by 30 years.

“But we must still add some modifications,” Ackermann cautioned.

AFP/mry

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EUROPE

Brussels warns Italy to rein in public spending amid pandemic

Most EU member states should continue to invest to support the continent's economic recovery, but heavily-indebted Italy should rein in public spending, the European Commission warned on Wednesday.

Italian Prime Minister Mario Draghi
Italian Prime Minister Mario Draghi expects the country's GDP to recover in the coming year. Photo: Alessandra Tarantino / POOL / AFP

“The economy is bouncing back from the recession, driven by a rebound in demand across Europe,” EU executive vice-president Valdis Dombrovskis said.

“But we are not out of the woods yet. The economic outlook remains riddled with uncertainty,” he said, warning that the coronavirus is still spreading, prices are rising and supply chains face disruption.

Despite these unpredictable threats, European officials predict a strong recovery, and want eurozone governments to maintain their “moderately supportive fiscal stance” to support investment.

EXPLAINED: How Italy’s proposed new budget could affect you

Italy, however, remains a worry. Its public debt passed 155 percent of its GDP last year, and Brussels is worried that it is still budgeting to spend too much next year.

“In order to contribute to the pursuit of a prudent fiscal policy, the Commission invites Italy to take the necessary measures within the national budgetary process to limit the growth of nationally financed current expenditure,” the commission report said.

The commission did not say by how much Italy’s spending plans should be reduced, and its recommendation is not binding on the government.

The European Union suspended its fiscal discipline rules last year, allowing eurozone members to boost their public spending to help their economies survive the Covid-19 pandemic.

But the European commissioner for the economy, former Italian prime minister Paolo Gentiloni, said governments should now “gradually pivot fiscal measures towards investments”.

“Policies should be differentiated across the euro area to take into account the state of the recovery and fiscal sustainability,” he said.

“Reducing debt in a growth-friendly manner is not necessarily an oxymoron.”

Italian Prime Minister Mario Draghi, a former European Central Bank chief, has said Italy’s economy is recovering after the pandemic-induced recession.

Draghi forecast economic growth this year of “probably well over six percent” in a statement on October 28th.

Italy’s GDP rate grew by 2.6% in the third quarter of 2021.

While economists don’t expect Italian GDP to bounce back to pre-pandemic levels until 2022, ratings agency Standard & Poor has revised its outlook for Italian debt from stable to positive.

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