Greece facing deeper cuts as price of bailout

(News Terupdate) - The International Monetary Fund and European Union are demanding further austerity measures from Greece as the price for a bailout, a top Greek labor union official said Thursday.

Greece will be required to cut civil servants' salaries, freeze their pay increases, reduce their pension payments, change tax rates, and increase the value-added tax consumers pay on purchases, according to Ilias Iliopoulos, the general secretary of the public sector union ADEDY.

The amount of the aid package currently being negotiated was not clear Friday. An amount earlier reported by CNN was unconfirmed, a spokesman for the Greek prime minister, George Papandreou, said Friday.

The International Monetary Fund did not respond immediately to a CNN request for confirmation of the value of the package. Its head, Dominique Strauss-Kahn, said Wednesday the agency did not release information about deals in the works until they were done.

"Until we reach this point there is no precise information to give because the information doesn't exist," he said.

Greece's credit rating has been slashed twice in the past two weeks -- most recently being downgraded to "junk" -- raising fears for the euro currency used by 16 nations across Europe.

Markets worldwide tumbled when Standard & Poor's downgraded Greece earlier this week. It's the first European country to fall below investment grade.

What Greece's debt rating downgrade means

The downgrade -- which makes it harder and more expensive for a country to borrow money -- was a major problem for Athens as it struggles to crawl out from beneath the country's massive debt.

The national debt of 300 billion euros ($394 billion) is bigger than the country's economy, and some estimates predict it will reach 120 percent of gross domestic product in 2010.

Germany is expected to contribute the lion's share of EU funding to bail out Greece. German Chancellor Angela Merkel said Wednesday her country will do what it can to help Greece out of its financial crisis, "but also Greece has to do its part."

She was meeting with Strauss-Kahn to hammer out specifics of the deal.

"Obviously what Greece has to do is a difficult thing, but I think they are committed to doing it," he said in an appearance with the German leader.

Merkel is being pulled in two directions -- toward bailing out Greece in order to stabilize the euro, and away from forking out cash because it is unpopular with German voters, with local elections coming up soon.

Former Greek Finance Minister George Alogoskoufis said Thursday that German taxpayers have nothing to worry about.

"German taxpayers are going to make money" when Greece repays the loans, he said on CNN's "Quest Means Business."

"Greece will never default," he added.

He said the country needed the aid package because it no longer had the options it used to have for raising funds.

"The markets have closed, we cannot rely on the markets as we have relied on the markets for so many years," he said.

Standard & Poor's slashed Spain's debt to a "AA" rating Wednesday, down from "AA+," as Merkel and Strauss-Kahn focused on Greece.

Who are the credit rating agencies?

Spain's economy is among the largest in the European Union, significantly bigger than Greece's.

Greek civil servants and private sector workers are planning a 24-hour strike May 5 to protest government austerity measures, the unions announced Wednesday. Sporadic demonstrations have already taken place in several cities, with sometimes violent clashes between police and protesters angry about the coming changes.

Source : CNN

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Senate panel approves Wall Street reform bill

Washington (News Terupdate) - A Senate committee on Wednesday passed a proposal aimed at helping protect the economy from future meltdowns and taxpayers from more Wall Street bailouts.

The Senate Agriculture Committee voted 13-8 in favor of the bill, which would impose regulations on the complex system of Wall Street trades known as derivatives.

Senate leaders now will look at merging the measure with a financial regulations reform bill already passed by the Senate Banking Committee that is headed for debate by the full chamber.

Sen. Chuck Grassley of Iowa was the lone Republican to vote with Democrats on the agriculture panel for the bill.

While Wednesday's hearing was but one step in the legislative process, it could provide part of the framework for a congressional deal on financial reform legislation -- a major priority of the Obama administration.

Republican senators who last week expressed unanimous opposition to the Banking Committee's bill now, after continued negotiations, say a compromise is possible.

"Both sides have expressed a willingness to make the changes needed to ensure without any doubt that this bill won't put taxpayers on the hook for future bailouts of Wall Street banks," Senate Minority Leader Mitch McConnell, R-Kentucky, said Tuesday. "I'm heartened to hear that bipartisan talks have resumed in earnest."

Sen. Blanche Lincoln, D-Arkansas, the Agriculture Committee's chair, opened the hearing by saying the legislation would confront "tough problems" in trying to increase regulation of Wall Street trading.

Lincoln, who is expected to face a tough re-election campaign this year, called the proposal "a robust package that balances the needs of strong, meaningful reform and recognizes the needs of these markets."

"This bill will bring 100 percent transparency to a currently unregulated, dark market," she said.

The Agriculture Committee oversees the Commodities and Futures Trading Commission, which has been in charge of derivatives for decades because they originated with farm commodities.

Watch how derivatives work

The House has passed its version of a finance reform bill, and now Democrats seek to bring a Senate version up for chamber debate.

The bill approved by Democrats on the Senate Banking Committee would set up new regulatory oversight of financial industry practices with the goal of preventing another Wall Street meltdown such as the one in 2008 that launched the U.S. recession.

It includes an "early warning" system intended to spot signs of another crisis as well as a $50 billion liquidation fund created with money from banks and other financial industry corporations to ensure an orderly process of closing down failing entities.

Source : CNN

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