EU Goes The Distance With Greece; The Bailout Will Happen
RICHARD QUEST, HOST: Stick to the plan and we'll stick with you. The EU goes the distance with Greece. Their debt is dragging us down, so says the Bank of England's governor. Plus, tonight Maria Sharapova tells us how to get the best returns. And she's not talking tennis. I'm Richard Quest. I mean business. Good evening. As Greece's July debt deadlines creep ever closer, help could soon be at hand to avoid a default. Greece, the IMF and the EU have finalized the plan for the country to get another traunch of money from its existing $150 billion bailout. But there is more, because the agreement paves the way for a second, much-needed emergency loan. The deal was hammered out in Brussels and demands some tough action from Greece. It includes some higher taxes, further austerity and a selloff of state assets. Greek lawmakers will vote on the reforms next week. Eurozone finance ministers made it clear it is crucial these measures are passed by the third of July, which would allow Greece to meet its debt repayments on the 15th. Greece's Prime Minister George Papandreou says funding is vital for the country's economic recovery.</s>GEORGE PAPANDREOU, PRIME MINISTER OF GREECE (through translator): We managed to secure speeding up of, on the part of European funding program for all EU funds, and with a better focus, and with two main focuses, shall I say. First to boost the Greek economy the growth of the Greek economy, that is the first focus and the first goal. And the second goal, of course, to create jobs, to find unemployment, and to face the tough following years ahead.</s>QUEST: The sides are now pretty clear. The Greek prime minister may be in the Eurozone camp and pushing hard for the new measures. There is, of course, opposition within his own country. Jean-Claude Juncker is a key figure in the Eurozone. President of the euro group of finance ministers, he is also the prime minister of Luxemburg. And he told me that even after this new agreement, there are obstacles to overcome.</s>QUEST: All right. The problem, of course, is even after a further bailout, or more funds, it still leaves Greece with a very high debt load. They are merely borrowing more money.</s>JUNCKER: Our intention is to allow Greece to go back to the financial markets as soon as possible. It is obvious that in 2012 this goal cannot be reached and achieved, but our intention is to bring Greece back into the position to back to financial markets as soon as possible. But this will take two or three years of course.</s>QUEST: Right.</s>JUNCKER: And we are very interested in having a assurance that the Greek debt situation is a sustainable one. And I do think that if Greece was to implement all the measures which have been foreseen, the Greek sustainability-the sustainability of the Greek debt can be envisaged in a positive way.</s>QUEST: Do you-can you be confident that the same problems that have affected Greece will not affect Portugal or Ireland?</s>JUNCKER: I am totally convinced that the measures which we-which Greece will have to take will be of such a nature that the Greek problem can be settled and to which, anyway, no fear as far as we are concerned, concerning the contagion to Ireland or to Portugal. The situation of Greece, or Portugal and Ireland, these situations are totally different.</s>QUEST: OK.</s>JUNCKER: And if we would not react in the way we are trying to react, contagion could take place. But Greece and ourselves are doing what we have to do there is no contagion effect to be foreseen for</s>QUEST: The commentator say that what this Greece crisis has shown is that the Eurozone is fundamentally flawed. As you look to the future now, what needs to happen, finally, to make the Eurozone perform better?</s>JUNCKER: We have to improve our governance and the methods of our governance. We have to improve the way we are checking throughout the year, the competitiveness performances of the different member countries of the Euro area. We focus our surveillance effort in the next couple of years, of course, to budgetary targets, but also to the macro-economic divergences existing in between the countries of the Euro area. This will be the focus of our attention in the next coming years.</s>QUEST: Finally, sir, tonight, can you tell us confidently that you are-that the Euro group, and the Eurozone, is ahead of the curve?</s>JUNCKER: I think from time to time we are given the impression that we are behind the curve, but as far as Greece and the new Greek program and our cooperation with the IMF and as far as the disbursement of the remaining traunch of our support is concerned, we are this time before the curve. I do think that on the third of July we will take all of the relevant decisions we have to take.</s>QUEST: Right.</s>JUNCKER: Under the condition, of course, that the Greek parliament will have done its work before that.</s>QUEST: Jean-Claude Juncker, the prime minister of Luxemburg and the head of the Euro group. There is no alternative. They are ahead of the curve and there is no contagion. John Defterios is with me. These measures that they are putting in place, the Greek austerity packages. I need you to tell me the numbers and whether they add up.</s>JOHN DEFTERIOS, CNN FINANCIAL CORRESPONDENT: Yes, it is good to get some common ground here. So let's take a look at tax and spending, Richard. If you break it all down, they talk about 28 billion euros, that is $40 billion, as we speak tonight.</s>QUEST: So, $40 billion, in tax-raising of taxes, and increasing spending, part of the austerity package.</s>DEFTERIOS: From 2011 to 2015, to be clear.</s>QUEST: Right. Right.</s>DEFTERIOS: Privatization, now this is a kind of a dodgy number because they are putting 50 billion euros as a target, $72 billion at an exchange rate of 1.45 against the dollar.</s>QUEST: Wait, 70?</s>DEFTERIOS: $72 billion.</s>QUEST: $72 billion dollars they believe they will raise from privatization. Bearing in mind they haven't raised virtually a nickel farthing, so far?</s>DEFTERIOS: They are trying to raise $3 billion in 2011. It is telling that they have a power company that they are trying to sell right now. And the general strike was called by that power company's employees, Tuesday and Wednesday of this week.</s>QUEST: And there is a golf course, as well, apparently, that is also up for privatization. Not that I play golf, but I can.</s>DEFTERIOS: This is interesting, a budget shortfall closed. They have the new finance minister, Mr. Evangelos Venizelos. Who came in last night and admitted to the fact that they had a shortfall. That is $5 billion.</s>QUEST: Right, if I add all this up, what is the total for the austerity package?</s>DEFTERIOS: So, the total austerity package brings you now to $117 billion.</s>QUEST: $117.</s>DEFTERIOS: So earlier in the week we talked about $112. We are now at $117 billion. This is quite interesting because it is something that is austere enough for somebody like Chancellor Merkel to go back to the German parliament and say I did my job to get the Greeks back on track. Let's take a listen to what she says.</s>ANGELA MERKEL, CHANCELLOR OF GERMANY (through translator): It was a good message that Greece met with the troika, the European Commission, the ECB, and the IMF, yesterday and that they agreed on its contributions. We have agreed that there will be a new program for Greece, which the Greek parliament has to vote on in the next week first. Then we will talk about the aid package. Which is made up from both voluntary and private contributions as well as public contributions.</s>DEFTERIOS: It is quite interesting to listen to the words she is saying at the end here, voluntary, private contributions and public contributions. This is Brussels code here talking back to the banks, saying that you need to make voluntary restructuring of this debt, or at least to stretch out the debt.</s>QUEST: Now let's just look, show me how much debt is coming due, and when?</s>DEFTERIOS: OK, perfect. Let's take a look. This is the Greek debt payments that are due, between 2011 and 2015, right?</s>QUEST: So, this is all the money that Greece will be rolling over, or the bonds become due in each of these years.</s>DEFTERIOS: Exactly. $40 billion in 2011, $53 billion in 2012, 44 billion in 2013, $46 in 2014, and in 2015, nearly $30 billion. Take a look at this. And this is why we are going to need some voluntary help from the private creditors, because it totals up to $174 billion.</s>QUEST: If all this happens, what does it leave us with in terms of Greek's debt to GDP. Because Japan has got a debt to GDP over $200, the U.S. is 100 percent of debt to GDP, roughly.</s>DEFTERIOS: Yes, this is quite mind boggling, actually. Because we keep on talking about the austerity the Greeks are going through. 2011, the debt to GDP is supposed to peak out at 157 percent of GDP. You would think that after all this austerity and all the pain by 2015 look at what they come up with, 140 percent of GDP. And this is what the Greek people are saying. We have to go through this for the next five years to come up with that. The president of the European Commission, Mr. Barroso, wanted put a brave face on it today. Let's take a listen to him.</s>JOSE MANUEL BARROSO, PRESIDENT, EUROPEAN COMMISSION: On Greece we have once again shown that we find the agreement when the agreement is needed. It was important because we have shown that our new way of dealing with European economy is working. We spent most of last night's session discussing the challenges, members states, and the European Union as a whole face. We did this with an openness and frankness that I have not seen before.</s>DEFTERIOS: So, openness and frankness we haven't seen before. That is a credit to the new finance minister as he put everything on the table. Some would say a lot of pain, very little gain when you look at that final number in 2015.</s>QUEST: John, many thanks.</s>DEFTERIOS: Thank you.</s>QUEST: We'll be watching that as it works its way through. One person at odds with the latest bailout plan is the governor of the Bank of England, Sir Mervyn King, who is now warning the Eurozone debt crisis will not be solved by stop-gap measures such as loans, because it doesn't address the key problems.</s>MERVYN KING, GOVERNOR, BANK OF ENGLAND: Right through this crisis, from the very beginning, when we were concerned about financial institutions, right up to now, when we are more concerned with sovereigns, and awful lot of people wanted to believe that it was a crisis of liquidity. It wasn't it. It isn't. Until we accept that we'll never find an answer to it. It was a crisis but based on sovereignty, or to be more precise, the build of very large amounts of debt where concerns crept in, apparently the ability of the borrowers to repay that debt. Initially financial institutions are now sovereigns. So whatever is the answer, provision of liquidity can buy only time.</s>QUEST: Mervyn King, "provision of liquidity can buy only time." Traders in Europe initially responded well to the news of the agreement. The excitement wore off as the day went on. The Xetra Dax was down, as was the Paris. But it was the Milan MIB index, the MIBTEL index, which fell the furthest. And one of the reasons, of course, was banking stocks in there. Moody's warning it may downgrade 13 Italian lenders. Milan's MIB now at the lowest level since 9-since November. Look at that, Unicredit down 5 percent. These are seriously big falls in that market. The euro just lost half a cent against the dollar; $1.4179. It is has now lost 4.5 percent against the U.S. currency, since the start of May. You need to know where the markets are at the moment. The big three, at the moment, in New York, the Dow, the Nasdaq, and the S&P; 500. Comfortably now 6 to 8 percent lower than their may highs. Oracle is down 3.5 on Nasdaq. Investors were worried about its poor results. Otherwise, Google down 1.2 percent that is on the announcement that the Federal Trade Commission is investigating Google because of its dominant position. The markets, you are up to date. Could future airline travel be powered by the sun? Pilots at the Paris air show say it is possible and their planes show just how.