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Business

Prime minister rules out appeal for help from IMF

Text by News Wires

Latest update : 2009-12-11

Greek Prime Minister George Papandreou says he will not appeal for financial assistance from the International Monetary Fund (IMF)as ratings agencies sound alarm bells over the country's spiralling debt.

AFP - Greek Prime Minister George Papandreou on Friday ruled out going cap in hand to the International Monetary Fund as a way out of his country's 300-billion-euro debt morass.

The bealeaguered premier said it was "out of the question to resort to the IMF" after earlier stating in Brussels at a European Union summit that Greece was "not about to default on its debts."

Greece's sovereign debt was downgraded this week by the international ratings agency Fitch, prompting fears of dangerous divergence in the 16 countries which use the euro.

Analysts had interpreted eurozone and EU political reaction as a precursor to the sort of bail-out assistance offered last year to Hungary, Latvia and Romania, especially with mounting deficit worries also extending to Ireland and Spain.


But if the 450-billion-dollar debt mountain alarmed markets, Europe's leaders gave Papandreou the benefit of the doubt late on Thursday in Brussels after he promised to reform a waste-riddled and corruption-addled economy.

Speaking at a post-summit press conference, Papandreou said that his government hopes to reduce Greece's public deficit from a forecast 12.7 percent of gross domestic product this year "by four percentage points" in 2010.

Its debt currently amounts to 113 percent of output.

"We recognise that the problems are serious, that the challenge is huge," added Papandreou, who is expected to make a statement on Monday outlining new plans to reassure international creditors.

Greek markets rallied behind him on Friday as officials worked on a crisis plan due to come into force within seven weeks to save his economy from the threat of a Latin American-style disaster.

The Athens stock exchange opened with a two-percent jump, building on 5.15-percent gains yesterday.

Prices had fallen by about 10 percent in the previous two days amid growing alarm that the country may be heading towards bankruptcy.

However, the 10-year yield on Greek bonds has risen to about 5.471 percent or 2.307 percentage points higher than on the German Bund, meaning that Greece has to pay nearly twice as much as Germany to attract lenders.

Papandreou vowed on Thursday to "revamp the Greek economy, to modernise the public sector, to fight chronic problems such as corruption... to make sure we have a sound, viable economy."

His finance minister, George Papaconstantinou, will also leave on a charm offensive next week to key European capitals and talks with his German, French and British counterparts.

Date created : 2009-12-11

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