Germany Eyes Approval for Greek Rescue Feb. 20

Germany wants euro-area finance chiefs to avoid splitting consideration of a 130 billion-euro ($171 billion) Greek rescue and a bond swap to cut the nation’s debt load at a meeting next week, coalition lawmakers were told by German government officials in a briefing.

As long as Greece meets conditions for the aid, the finance chiefs will probably approve the package along with the debt exchange, three German officials involved in the telephone briefing yesterday said. A Finance Ministry spokesman declined to comment.

Wrangling among euro-area finance ministers on a Feb. 15 conference call over how to reduce Greece’s debt load and tighten control of the aid raised the prospect of a two-step process, according to two people familiar with the talks. In that scenario, the ministers’ Feb. 20 gathering in Brussels would be limited to kicking off the bond exchange and deferring decision on the rest of the bailout funds.

As recriminations fly between Greece and its northern European creditors, the clock is ticking toward a March 20 bond redemption when Greece must pay 14.5 billion euros or trigger the first sovereign default in the euro’s 13-year history.

“We expect the Greeks to rise to their responsibilities,” German Deputy Finance Minister Steffen Kampeter told a group of lawyers in Hamburg yesterday. “This coming Monday, we will see whether Greece delivers or whether we will be forced to decide on another course of action, one that is not desired.”

Euro Gains

Investors sent the euro and global stocks higher as they anticipated the culmination of the seven-month effort to complete a second bailout for Greece. The currency rose for the first time in five days, gaining 0.7 percent to $1.3153 at 11 p.m. in Athens.

While Greek lawmakers this month passed austerity measures that were required for the aid, the euro ministers wrestled with the latest setback, hearing on their call that Greece would miss debt-reduction goals. Without further measures to close the funding gap, Greece’s debt would fall to 129 percent of gross domestic product in 2020, missing a target of 120 percent, said three people familiar with the talks who declined to be named because they are still in progress. Last year, the level was about 160 percent.

European authorities are discussing charging it lower rates, the three officials said. Greece obtained its first, 110 billion-euro loan package in May 2010 at rates averaging 5 percent. Euro governments have already cut that figure once, to about 4 percent in March 2011.

ECB Holdings

Central bankers have also indicated that the ECB could funnel future profits from its Greek bond holdings to national governments and on into the crisis program. They have agreed that they “don’t wish to make a profit on Greece,” ECB Governing Council member Luc Coene of Belgiumsaid this week. An ECB spokesman declined to comment.

More controversial is a proposal for national central banks to take part in the private exchange by accepting losses on Greek bonds in their investment portfolios. France is virtually alone in backing that idea, one of the officials said.

The ECB is swapping its Greek bonds for new ones to ensure it isn’t forced to take losses in a debt restructuring, three euro-area officials said.

The multiple scenarios led to a possible two-step decision -- authorizing the bond exchange next week and then completing the 130 billion-euro public aid program -- that would raise political risks by requiring two votes in some national parliaments.

Summit Showdown

http://www.bloomberg.com/news/2012-02-16/germany-targets-approval-for-greek-bailout-plan-on-feb-20-lawmakers-say.html

Iran Unlikely to Strike First, U.S. Official Says

The Iranian military is unlikely to intentionally provoke a conflict with the West, the top U.S. military intelligence official said today.

Lieutenant General Ronald Burgess, director of the Defense Intelligence Agency, said Iran probably has the ability to “temporarily close the Strait of Hormuz with its naval forces,” as some Iranian officials have threatened to do if attacked or in response to sanctions on its oil exports by the U.S. and European Union.

“Iran has also threatened to launch missiles against the United Statesand our allies in the region in response to an attack,” Burgess said in testimony at a hearing today of the Senate Armed Services Committee. “It could also employ its terrorist surrogates worldwide. However, it is unlikely to initiate or intentionally provoke a conflict or launch a preemptive attack.”

Iran has the capability to strike regional and European targets with its ballistic missiles and is seeking to improve their accuracy, Burgess said in the latest U.S. public assessment of Iran’s military prowess. Iran’s regional military capability continues to improve, with new ships and submarines and expanded bases in the Gulf of Oman, Persian Gulf and Caspian Sea, he said.

No Israeli Decision

U.S. interests are threatened by Iran through its support of terrorist and militant groups, as shown in “the recent plot to assassinate the Saudi ambassador to the United States,” Burgess said. Burgess said Israel hasn’t made a decision to attack Iran’s nuclear facilities.

Iran’s Vice President Mohammad Reza Rahimi said on Dec. 27 that his nation may close the Strait of Hormuz, the passageway for about one-fifth of globally traded oil, if the U.S. and its allies impose stricter economic sanctions in an effort to halt his country’s nuclear research. U.S. officials such as Pentagon spokesman George Little have said since that threat that they haven’t seen any Iranian moves to close the waterway.

Burgess testified about the annual assessment of global threats by U.S. civilian and military intelligence agencies. Turning to the war in Afghanistan, Burgess told the committee that the country’s national army and police face continued challenges in developing “into an independent, self-sustaining security apparatus.”

‘Pervasive’ Afghan Corruption

http://www.bloomberg.com/news/2012-02-16/iran-unlikely-to-strike-first-in-conflict-u-s-intelligence-official-says.html