Παρασκευή, 23 Απριλίου 2010

Greece has formally asked for the activation

Greece has formally asked for the activation of an EU-IMF financial rescue package to help pull the debt-ridden economy out of its crisis.

It had hoped that just the promise of EU support, agreed last month, would have been be enough to reassure markets and help its recovery.

But Greece's problems have continued to hit investor confidence in the euro and other European economies.

Eurozone countries will now provide tens of billions of euros in loans.

Greek prime minister
Mr Papandreou said the aid was a 'national necessity'

On Friday evening, several thousand protesters took to the streets of Athens to demonstrate against further austerity measures.

Earlier this month, a deal was agreed under which eurozone nations would provide emergency loans of up to 30bn euros ($40bn; £26bn) in the first year, with a further 10bn euros coming from the International Monetary Fund (IMF).

The European Commission and the IMF said they were optimistic that the exact details of a loan could be worked out quickly.

However, in Germany, where there has been public opposition to funding a bail-out, Chancellor Angela Merkel said any aid would come with "very strict conditions", including a credible savings plan.

ANALYSIS
Andrew Walker
Andrew Walker, BBC world economics editor, at IMF Headquarters in Washington

Greece's request has come as no surprise to anyone, least of all IMF managing director Dominique Strauss-Kahn. As he pointed out himself, IMF staff have been advising Greece on managing the public finances for weeks.

Why does the rest of the euro area care so much? Partly it wants to avoid the general disruption to the euro area financial markets that would result if Greece failed to pay its debts.

The next candidate for trouble, if the dam bursts, is probably Portugal.

Anxiety also extends to a lesser extent to others such as Spain, Italy and Ireland. Mr Strauss-Kahn was keen to play down the likelihood of further rescues. "Of course, we are prepared to help countries if needed," he said, "but we do not see a need these days to focus on any other countries but Greece."

Let's hope he is right

The German finance minister, Joerg Asmussen, said his country was doing its bit. "The German side is ready to act with its part of the aid package. I cannot say anything about the time frame, but originally it should need some two weeks," he said.

Greek Prime Minister George Papandreou, on a visit to the Aegean island of Kastellorizo, said the markets had not responded positively to the austerity measures designed to reduce the country's debts, as he had hoped.

Confidence in the Greece economy has continued to fall, pushing its cost of borrowing to record levels in recent days.

It was therefore now a "national and pressing necessity" to access the EU-IMF aid, he said, and he had asked Finance Minister George Papaconstantinou to make a formal request for the loan plan's activation.

"Our partners will decisively contribute to provide Greece the safe harbour that will allow us to rebuild our ship," added Mr Papandreou.

'Pressure on'

Greece has sent a letter to the European Commission, the European Central Bank and the Eurogroup representing other Eurozone countries "formally requesting the activation of the support mechanism".


For non-eurozone senior officials, the Greek problem looks manageable. They just wish everyone would get on and manage it

Stephanie Flanders, BBC economics editor

There are still some hurdles to clear though.

The German opposition SPD is demanding a full debate on their portion of the aid package which could delay any German contribution.

So the IMF may be called on to finance the first portion of the aid. The next immediate step will be for eurozone ministers to agree an interest rate for loans to Greece - which will be considerably lower than the 8% they are facing on the open market at the moment.

The BBC economics editor Stephanie Flanders said for non-eurozone senior officials, the Greek problem looked manageable. They just wished everyone would get on and manage it.

She said the clock was now ticking and several countries needed to get parliamentary approval for the plan, which would take some weeks.

She added that delays had already pushed up the amount needed to support Greece, and further pain could be in store.

(ΒΒC/NEWS)

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