Greece

Investor concerns over Italy and Spain are complicating efforts to deliver Greece its next chunk of rescue aid, underscoring the increasing difficulty Europe faces in reining its more than year-old credit crisis, The Wall Street Journal reported. Greece is due to receive the next installment of its original, €110 billion ($158 billion) bailout in September. But Italy and Spain, both of which committed to extend bilateral loans to Greece with other euro-zone countries, have seen their own borrowing costs rise recently.

It’s largely an issue of accounting, but we anticipate that Greek debt could end up higher at the end of 2011 than previously forecast–even if the entire debt-reducing discount bond-buyback program and most of the discount bond-exchange program happen this year, The Wall Street Journal Brussels Beat blog reported. Why’s that? The problem is the bond exchange. As we’ve previously laid out, the bond exchange will swap €135 billion of old Greek debt for €121.5 billion in new debt, cutting the total debt stock by €13.5 billion. Eventually.

European leaders have agreed to loan Greece more than $140 billion over the next three years and have broadened efforts to support weakened governments and banks in the region in what they hope will be a convincing response to a lingering financial crisis, The Washington Post reported. The measures approved in Brussels are meant to put Greece on a more sustainable footing and convince world markets that the country — and indeed every other nation that shares the euro as currency — will pay its debts.

German Chancellor Angela Merkel, Europe's reluctant paymaster, doused expectations of any comprehensive solution to Greece's debt crisis at an emergency euro zone summit on Thursday, Reuters reported. "Further steps will be necessary and not just one spectacular event which solves everything," Merkel told reporters on Tuesday. Widespread hopes for a single solution to make the Greek crisis disappear were unrealistic, she said, as officials wrestled with complex options for involving private bondholders in a second rescue of the debt-stricken euro zone state.

The group representing Greece’s private creditors said Sunday that progress was being made in discussions on international banks’ involvement in the next Greek bailout and that talks would continue this week before a meeting of European leaders on Thursday, the International Herald Tribune reported. Charles Dallara, the managing director of the Institute for International Finance, an organization representing major global financial firms, said that “discussions are continuing and progress is being made.” Mr.

Greek Prime Minister George Papandreou said the euro zone and International Monetary Fund must quickly approve a second bailout for his country to avoid its economic reform plans collapsing, a German newspaper reported. "The current mood doesn't help us to get through this crisis," Papandreou told the Financial Times Deutschland, in a brief preview of an interview to be published in the paper's Thursday's edition, Reuters reported. "This uncertainty scares investors.

With no consensus on how to share the burden of a new Greek bailout with the troubled country's private-sector creditors, European finance ministers struggled at a meeting Monday to make progress on a fresh aid package, The Wall Street Journal reported. Arriving in Brussels, officials offered widely divergent views on how to proceed.

Discussions between bankers and government officials about Greece have undergone a fundamental shift in recent days, turning toward reducing the country's mountainous debt burden instead of just staving off a near-term financial crisis, people close to the talks say, The Wall Street Journal reported. Talks began two weeks ago with French bank proposals to encourage investors to contribute to a new bailout by reinvesting the proceeds of Greek government bonds maturing over the next three years.

European governments' plan for private-sector creditors to help Greece's next bailout without triggering a default were thrown into doubt Wednesday, as senior German officials resurrected a once-rejected proposal that would cost investors more, The Wall Street Journal reported. The German proposal—calling for investors to be encouraged to swap Greek government bonds for new bonds—had been ditched a month ago after strong opposition from the European Central Bank and governments including France, because it would lead to Greece being called in default by rating agencies.

Europe's hopes for a significant contribution by private bondholders to a new bailout for Greece are fading, as it becomes clear that banks have sold off a substantial proportion of their Greek government-bond holdings despite pledges by some of the institutions not to do so, The Wall Street Journal reported. Greece has about €64 billion ($93 billion) of benchmark bonds coming due in the next three years, among other liabilities, and euro-zone leaders had hoped that private lenders would voluntarily take on longer maturities in order to improve the country's battered finances.