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EU-IMF, Greece focus on debt rescue details

21 April 2010, 12:38 CET
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EU-IMF, Greece focus on debt rescue details

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(ATHENS) - Greece got down to work with the EU and IMF on Wednesday on a debt rescue which is looking increasingly likely, with borrowing costs shooting above 8.0 percent.

But as experts from the EU, European Central Bank and IMF began the talks, fresh strikes began against the government's austerity cuts.

The experts are set on a 10-day visit which began with a session with Greek Finance Minister George Papaconstantinou on "financial assistance".

In Paris meanwhile, a revised law put before ministers showed that France alone will find 3.9 billion euros (5.4 billion dollars) in aid for Greece's debt-stricken economy in this year's budget.

Amid such strong signs that Greece is getting ready to appeal for help, the finance ministry said its discussions with the EU and IMF "concern a three-year programme of economic policies."

This "can be supported with financial assistance from eurozone members and the International Monetary Fund should Greek authorities decide to request the activation of the mechanism," it said in a statement.

That was a reference to a rescue package tortuously agreed within the EU and eurozone, and involving the IMF, but which still leaves many aspects uncertain.

Among these are the precise terms, conditions, interest rates which would apply if and when Greece asks for help to avert partial default on debt falling due by the end of May.

The vice tightened further on Wednesday when the interest rate demanded on Greek 10-year government bonds rose to a record above 8.0 percent after setting a previous high point of 7.851 percent on Tuesday.

Greece needs about 10 billion euros within the next few weeks and about 30 billion euros in total for the rest of the year to pay current bills including some pensions, and help it enact massive budget cutbacks and structural reforms imposed by the EU.

The Ta Nea newspaper here commented that "the final countdown" to Greece appealing for EU-IMF loans had begun.

Citing sources in Brussels, the daily said that the Greek government was unlikely to call for assistance before crucial regional elections in Germany on May 9 but that the appeal would probably be made on May 15.

An issue of 10-year Greek bonds totalling 8.5 billion euros expires on May 19.

The possibility of IMF involvement has angered unions which launched two days of strikes led by Communist workers and state staff who are bearing the brunt of spending cuts designed to plug a massive budget deficit.

Striking sailors blocked ferries from departing the port of Piraeus, Communist youths picketed hotels on central Syntagma Square and state hospitals worked on emergency staff as doctors walked off the job.

Actors also announced a two-day support strike, closing down theatres.

The entire public sector will shut down on Thursday as civil servants hold a 24-hour strike, while the union representing the private sector has also indicated plans for industrial action.

The government has said it will not hesitate to call on the EU-IMF backup loan under the terms of a eurozone deal to extend Greece up to 45 billion euros (61 billion dollars) at preferential interest rates, should this prove necessary.

At UniCredit Bank in Italy, analysts said that "activation of the aid plan is the easiest and most sensible way out of the crisis."

They said the debt redemption date was only four weeks away" and that "action needs to be taken quickly," estimating that "45 billion euros should be enough to cover redemptions, coupon (bond interest) payments and the deficit until next year."

Papaconstantinou had told a news conference on Tuesday that "there is no chance that Greece will be left hanging in May."

A solution would be found "either by borrowing on the market, or from our (EU) peers," he said, referring to the stand-by rescue package.

Greece has been forced to pay record interest rates on international bond markets amid enduring investor doubts that its strategy to get its spiralling debt under control will work.

On Tuesday, Athens sold 1.95 billion euros' worth of three-month treasury bills but at more than double the cost of its last comparable issue as buyers exacted a high price for their money.

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