Greek police clashed with stone-hurling youths and thousands protested against austerity in Athens on Wednesday as EU and IMF envoys began talks with the government on stepping up fiscal reforms. After bailing out Greece one year ago, European governments have concluded that additional aid may be necessary as Athens struggles to meet its economic targets and win back the confidence of investors, who now believe it will eventually have to restructure its debt mountain.
-- Police confront stone-throwing Athens protestors
EU finance ministers will discuss the Greek crisis next week but are not expected to decide on any new support measures until the mission that began on Wednesday gives its verdict on progress on reforms. A eurozone source told Reuters that the ministers were likely to tell Greece it must deliver on savings and privatisation targets already agreed if it wants new emergency financing next year.
The euro had risen on Tuesday on a report, later denied, that a new 60 billion euro rescue for Greece was on the cards. But it fell back to $1.4225, a three-week low, on Wednesday amid doubts that Europe would provide timely aid to both Greece and Portugal. In a positive sign for Portugal, Finland's Prime Minister-elect Jyrki Katainen said he had clinched a deal with the country's number two party, the Social Democrats, to back a bailout for Lisbon.
The EU/IMF mission to Greece will focus on a 2011-2015 fiscal plan and on Greek progress in raising 50 billion euros from privatisations. Markets are braced for some form of debt restructuring in the long-run as Greece labours under a 327 billion euro debt mountain.
Ten-year Greek bonds currently change hands at around 55 percent of their face value, carrying a secondary market yield of 15.7 percent. They were little changed on Wednesday but up more than 3 percentage points since the start of the year.
One year into their austerity plan, Greeks are tiring of sharp spending cuts and tax rises that threaten their way of life. Police fired teargas at protesters in Athens and some 20,000 protesters - fewer than in previous demonstrations - marched to parliament as part of a 24-hour nation-wide strike against the Socialist government's austerity drive. Germany, which as Europe's largest economy sees itself as the paymaster of loans for Greece, Ireland and now Portugal, has made it clear there can be no further aid or easing of the terms of credit without fiscal commitments in return.
Chancellor Angela Merkel threw her support behind Italian Mario Draghi to become the next president of the European Central Bank on Wednesday, a move which may be unpopular at home and could increase pressure on her to win victories on other issues such as aid. French Finance Minister Christine Lagarde sought to reassure investors that, while extra aid for Greece was not yet decided, a debt restructuring was out of the question.
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