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Greek PM urges EU partners to deliver clear debt support

Text by News Wires

Latest update : 2010-03-19

Greek Prime Minister George Papandreou has asked EU countries to live up to pledges to help his country overcome its debt crisis when they meet at a summit next week, saying he would rather not turn to the International Monetary Fund for aid.

REUTERS - Greece’s prime minister warned on Thursday that Athens would not be able to make planned deficit cuts unless it can borrow money more cheaply and said he would prefer not to have to turn to the IMF for help.

Prime Minister George Papandreou told a committee in the European Parliament that austerity measures announced by the Greek government showed it was committed to the stability of the euro and that it would carry out necessary structural reforms.

“But if we keep borrowing at very high rates, and this is the challenge we have, we cannot sustain the deficit reduction that these hard measures aim to achieve,” he said. “We should be able to borrow at rates that are normal.”

The Greek government needs to borrow 53 billion euros ($72 billion) in financial markets this year and must refinance around 20 billion euros of debt in April and May, all at interest rates that some economists say are unsustainable.

Greece, which acknowledged last year it had cheated with its economic statistics to hide the depth of its deficit problems, routinely has to offer a premium of at least three percentage points more than benchmark Germany to borrow money.

Bond yields have been hit by fears over Greece’s ability to honour its debts. On Thursday the price investors demand to hold Greek debt instead of German bonds widened to 310 basis points.

Papandreou said countries that run into trouble need a mechanism to help them. He said Greece had not sought financial aid but would prefer any help that is required to come from Europe rather than the International Monetary Fund.

Papandreou said Greece was already implementing IMF style structural reforms without having access to IMF funds.

“We have talked to the IMF, they would have asked us for nothing more. But I would prefer the European solution. I would prefer the European solution as part of the euro zone, as a European,” he said.

“This is not to say...we are asking for money, but to have it on the table, some form of an estimate on the table. That alone, I believe, would be enough to make sure that the spreads, the speculators would be warned off.”


Greece’s new austerity measures are intended to bring its deficit down from 12.7 to 8.7 percent of gross domestic product this year, including cuts in public sector pay and tax rises.

Athens’ problems have undermined confidence in the euro and caused concern that a similar crisis could hit other heavily indebted countries such as Portugal or Spain.

European Union finance ministers this week backed plans by the countries using the euro to help Greece financially if it seeks aid, but gave few details of how they would help.

Ministers hope their political support and Greece’s reform efforts will be enough to overcome the crisis without a bailout.

German Chancellor Angela Merkel on Wednesday backed calls for moves to change the European Union treaty to allow countries to be thrown out of the euro zone if necessary as a last resort.

Papandreou reiterated that Greece would not be leaving the euro area.

“We are not going to default. Let us not create the image we are at the edge of the abyss,” he said.

Date created : 2010-03-18


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