Papademos To Hold Talks With Political Leaders Amid Concerns

Greek Prime Minister Lucas Papademos will hold a meeting with three of political party leaders today after postponing it yesterday for the second time as the government and international creditors disputed over the clauses demanded to secure a second bailout worth 130 billion euros announced in October.

Papademos, instead, conducted unscheduled talks yesterday with the so-called troika on details of the spending cuts needed to become eligible for receiving the aid package.

The Greek Prime Minister managed to reach a tentative agreement with three of political party leaders after talks over the weekend, where they agreed to make further budget-cutting measures equal to 1.5% of GDP, yet they will continue talks today to flesh out details as well as other to discuss measures demanded by international lenders to grant Greece a second aid fund; specifically, bank recapitalization framework, wage cuts and measures to enhance competitiveness.

Still, there are concerns that Greek political leaders may not reach consensus regarding the further spending cuts needed to receive a second bailout, thus tumbling into default as early as March as the government has to repay 14.5 billion euros of debt maturing.

Antonis Samaras, the head of the second biggest political party, said ‘they are asking us for greater recession, which the country can’t take,’ and ‘I will fight to avoid that.’

On the other hand, the Greek government is under pressure from German Chancellor Angela Merkel who said ‘I can’t quite understand why we need a few more days.’

Regarding talks with private-sector bondholders, Papademos held talks yesterday with Charles Dallara, managing director of the International Institute of Finance, where negations will probably come up with a deal which includes the acceptance of 3.6% borrowing cost on 30-year bills and losses equal to 70% by the creditors, yet euro area finance ministers said no deal could be accomplished before adopting reforms needed for the second bailout.

Moreover, the European continent lacks fundamentals, except for German trade balance data which showed that the surplus narrowed to 12.9 billion euros in Dec from the revised surplus of 15.9 billion euros. Exports dropped 4.3% compared with the revised 2.6%, while imports slipped 3.9% from the revised -0.2%.

The European common currency is currently trading near the day’s opening level versus the U.S. dollar around 1.3263 after gaining in the previous two sessions.

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