Greek Prime Minister George Papandreou said Friday he is negotiating a new bailout worth some 110 billion euros, as Europe enters a crucial 10 day period to ringfence the euro crisis.
The Greek premier is in the eye of a storm threatening financial markets, the unity of Europe’s 17-nation currency area, and even the EU – with the United States warning of a potential to drag down world economic recovery.
“We are talking about a huge, huge amount,” the Agence France-Presse quoted Papandreou as saying after formally requesting aid at a two-day European Union summit in Brussels.
While he said it was “too early to give a precise amount,” the final sum would be “similar to the first aid package” in May 2010, which was not enough to prevent the government in Athens from slipping ever deeper into the red.
The actual size, Papandreou admitted, “depends on the participation of the private creditors,” those banks, pension funds and insurers that the EU wants to contribute to a rescue by way of an “informal and voluntary” rollover.
Greece needs to impose ever more unpopular austerity on a restive people on June 28, with the European Union placing its faith in Athens to clear parliamentary opposition and a general strike.
Even before the new bailout, Greece owes the equivalent of a year-and-a-half of total national economic output, some 350 billion euros.
British banks face an indirect risk from Greece’s financial crisis despite having a “remarkably small” direct exposure to the country, the governor of the Bank of England said Friday.
Mervyn King called for greater disclosure of sovereign and banking exposures, and of other risks which may be lurking on balance sheets, to bolster confidence in the broader financial system, The Associated Press reported.
“If there is uncertainty about exposures and a lack of transparency and people simply do not know which other institutions could be at risk because of their direct and indirect exposures, then there is always the risk that people may feel it’s just not worth continuing to roll over funding to institutions,” King told a news conference.
On Friday, the euro slid against the dollar amid persistent concerns the Greek debt crisis spreading contagion across the eurozone.
German Chancellor Angela Merkel said Friday that leaders had struck “an important political accord for the stabilisation of the euro,” which Belgian Prime Minister Yves Leterme said took just half an hour to thrash out.
Merkel stressed the EU had “encouraged Ireland, Portugal and Greece to follow the roadmap set down with the troika” of the European Commission, the ECB and the IMF that is monitoring the rescues.
Portugal’s new Prime Minister Pedro Passos Coelho, meanwhile, said his coalition government is preparing to accelerate and possibly broaden austerity measures the country promised in return for a $110 billion bailout.
Coelho, who took office earlier this week at the head of a center-right administration, says he is also considering a swifter reorganization of loss-making state companies.
Passos Coelho said after a European Union summit Friday in Brussels that he will announce details of his plans next week.