Greece to activate EU-IMF loans

[mgt23]

http://news.bbc.co.uk/1/hi/business/8639440.stm

Greek Prime Minister George Papandreou has asked for activation of an EU/IMF debt rescue mechanism, to help pull the economy out of its current crisis.

It follows negotiations with eurozone nations and International Monetary Fund over the details of an emergency rescue package.

It comes a day after data showed a worse-than-expected budget deficit of 13.6% of gross domestic product.

Credit rating agency Moody's also cut its rating on Greek debt on Thursday.

Uncertainty remains

Mr Papandreou is visiting the Aegean island of Kastellorizo before travelling to Washington for a meeting with the IMF.

   
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He said the markets had not responded positively to Greece's austerity measures.

That meant it was now a "national and pressing necessity" to access the EU-IMF aid, and that 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.

The euro rallied in late morning trade in London, up 0.1% at $1.3308.

But analysts said even though the Greek move had been expected there was still some uncertainty ahead.

"I don't necessarily think we're out of the woods here because there's a fair bit of wrangling to go in terms of how much the package is going to be, and the terms that are going to be attached to it," said Sean Maloney, an interest rate strategist at Nomura.

"I think the reaction we've seen so far is understandable but whether it extends another significant amount from here is another question."

Spending cutbacks

The loans package has been put together to help pull the eurozone member out of its debt crisis.

Greece is swamped by 300bn euros of debt and needs to borrow about 54bn euros this year alone.

In the middle of April finance ministers of the 16 eurozone nations agreed to provide up to 30bn euros (£26bn) in emergency loans for debt-hit Greece should it ask for them.

At the time they offered a three-year financing programme at interest rates of about 5%, based on IMF formulas.

Meanwhile, spending cutbacks being introduced by Athens to restore its finances are being resisted.

On Thursday, tens of thousands of Greek civil servants staged a strike to protest against the austerity programme.

Protesters have been demonstrating in Athens, not far from where officials from the IMF and European Central Bank are meeting to determine the fine details of a financial rescue package for Greece.

Are you in Greece? What do you think of the prime minister's request? Send us your comments using the form below.

[mgt23]

http://www.reuters.com/article/idUSLDE6 ... arketsNews

TEXT-Greek PM statement on activating EU/IMF aid
Fri Apr 23, 2010 7:53am EDT

ATHENS, April 23 (Reuters) - Greece said on Friday it was tapping an EU/IMF aid mechanism aimed at rescuing the euro zone member from a debt crisis.

Bonds  |  Greece

These are excerpts from Prime Minister George Papandreou's statement made from the remote Aegean island of Kastellorizo and provided in English by his office:

"Yesterday, we learned of the real deficit figures. It reminded us of all the mistakes ... that we inherited from the previous government.

We inherited a boat ready to sink; a country without credibility; a country that had lost the respect of its friends and its partners; an economy exposed to the mercy and the appetite of the speculators.

From day one, we have rolled up our sleeves and begun the difficult work to change this gloomy situation.

We prepared a plan with difficult and painful measures, but we regained our credibility.

After a marathon, we were vindicated in arriving at the powerful decision by the EU to support the country with a landmark mechanism.

We were hoping that such a decision would be enough to calm down markets in order to give us the possibility to borrow with lower rates.

In other words, we were hoping to have the necessary calmness to concentrate on the big changes that our country needs: To build an economy that is viable and competitive and to make the Greeks feel proud again.

But there was no response from the markets. Either because they didn't believe in the political will of the EU or because they decided to go on with speculation.

Today the situation threatens to demolish not only the sacrifices of the people but also the peaceful path of our economy. We don't want all of these sacrifices by the Greek people to be in vain.

We won't allow this.

'A NEW ODYSSEY FOR GREECE'

This is the moment. The time that was not granted to us by the markets, will be given to us by the support of the euro zone.

It is a national necessity and priority to officially ask our partners to activate the mechanism that was created by all of us.

I have asked the finance minister to make all the necessary arrangements. I have asked our partners to contribute decisively in order to give Greece a safe harbour. This will give us the possibility to rebuild our ship of state with new and reliable materials.

At the same time, we are sending a strong message to the markets that the EU is serious about protecting its common interests and common currency.

We are on a difficult path, a new Odyssey for Greece and for the Greek nation. But we know the way to Ithaca and we have charted the waters in our quest.

We have in front of us a journey demanding a common will from us all- so we can arrive there safe, proud, and with a sense of justice.

Our final target, our final destination, is to liberate Greece from surveillance and guardianship. To liberate the forces of the Greek nation, every Greek, from rigid practices and mentalities which have created obstacles for many decades.

We need to give some oxygen where there was no air; justice where there is no justice; transparency where there is darkness; Security where insecurity prevails; and development for all.

Our inspiration, our faith, is this land ... Our wonderful people, our youth, our possibilities, our visions. I'm absolutely sure we will make it.

Greece needs to believe in its possibilities, its values, and itself.

(Editing by John Stonestreet)