Brussels, 28/02/2012 (Agence Europe) - The Greek government is pulling out the stops to meet their commitments ahead of the extraordinary meeting of the Eurogroup on Thursday 1 March, a few hours before the European summit will decide on progress with the second Greek bailout. Lucas Papademos' government is due to approve measures like a slashing of wages in the private sector and the government was due to agree on a series of other measures to slash public spending and retirement pensions.
Like the financial markets, Europe is not surprised by the news that Standard and Poor's has further downgraded Greece's debt - to the lowest level (junk bond status). The head of the Eurogroup, Jean-Claude Juncker, commented in a press release on 27 February: “I take note of the decision by S&P to lower Greece's ratings to SD (Selective Default) as a result of Greece having introduced legislation retrofitting Collective Action Clauses to certain types of Greek government bonds. This or possible similar rating decisions by credit rating agencies have been duly anticipated and taken into account in the planning of the PSI operation. More specifically, following the Eurogroup meeting of 20 February 2012, euro area member states are in the process of carrying out the relevant national procedures that allow, inter alia, the provision by the EFSF of a buy back scheme (collateral enhancement) allowing for the eligibility of marketable instruments issued or guaranteed by the Greek government for use as collateral in Eurosystem monetary policy operations for the period of the SD ratings.” The introduction of these clauses into legislation may allow the Greek government to force some private lenders to agree to the bond write-down required by the Eurogroup as part of the second bailout. If Greece decides to use them, the bond-holders would be placed in a far less favourable position than they would normally expect if Greece were to meet its debt repayment deadlines. (MB/transl.fl)