Greece said Tuesday it could call on loan backup from the EU and the IMF by next month as its bond yields hit a record high and it was forced to once again pay steep rates to borrow money.
The Greek finance minister insisted that the recession-plagued economy would not be “left hanging” whilst seeking to raise fresh loans in May and that it “will find funds” through an EU-IMF loan guarantee mechanism if necessary.
The loan guarantee can be “quickly” adopted and will give access to short-term loans, Finance Minister George Papaconstantinou told a news conference.
But he repeated that Greece will request its activation “when we deem it necessary, and that will depend on loan conditions and the progress of talks” with officials from the European Union, European Central Bank and International Monetary Fund which start Wednesday in Athens.
The Greek government needs to raise around 10 billion euros in May to keep up its debt and budget payments. On top of its urgent borrowing needs, the government faces new strikes this week over its budget austerity measures.
On Tuesday it sold 1.95 billion euros worth of three-month treasury bills but at over double the cost of its last comparable issue, a recurring feature in its recent paper offers.
The joint mission of EU, ECB and IMF staff numbers 20 people and will remain in Greece for around 10 days, the minister said.
The meeting was initially due on Monday but the air chaos in Europe caused by the volcanic eruption in Iceland pushed it back to Wednesday.
The EU-IMF rescue deal is worth up to 45 billion euros (61 billion dollars) at around five percent interest rate in the first year.
But the government last week called for talks on a “multi-year programme of economic policies.” Its overall debt stands at nearly 300 billion euros.
Papaconstantinou added that he will travel to Washington on Friday for a scheduled members’ meeting of the IMF taking place Saturday and Sunday where he will meet IMF director Dominique Strauss-Kahn.
Earlier Tuesday Greece raised 1.95 billion euros in treasury bills drawing major demand after originally seeking to raise 1.5 billion euros.
The Greek debt management agency said that buyers were offered a uniform yield of 3.65 percent compared to 1.67 percent in the last three-month bill issue in January.
The auction — the third in a week — comes after the rate of return on Greek 10-year government bonds rose to a record of 7.807 percent on Tuesday.
The yield was already at 7.618 percent late on Monday — way beyond the level that Greece can afford to pay if it is to get through its debt crisis.
Last week, the government drew strong demand for one-year and six-month bills but had to offer high interest rates despite the EU-IMF stand-by rescue guarantee, which was intended as a shield against steep borrowing rates.
German central bank governor Axel Weber has said Greece may need up to 80 billion euros (108 billion dollars) in financial aid to avoid default, the Wall Street Journal reported.
Greek Prime Minister George Papandreou on Monday said he would not hesitate to ask for a debt rescue from the EU and IMF if he deemed it to be “in the national interest.”
The government is labouring to reduce its debt and cut its budget deficit, currently at over 30 billion euros or at least 12.9 percent of output, by an unprecedented four percentage points this year.
It is implementing spending cuts and tax hikes worth around 16 billion euros this year, angering labour unionswhich have staged general strikes and a series of work stoppages.
The entire public sector will shut down Thursday as civil servants hold another 24-hour strike. Another union representing Communist workers has called a 48-hour strike from Wednesday.
State-employed doctors have also announced a 48-hour strike on Wednesday.
The largest Greek union, which represents the private sector, has also indicated plans for industrial actionlater this month.
The country is already caught in a deepening recession, and the state statistics office on Tuesday said unemployment had increased to 11.3 percent in January with over 560,000 people out of work, a 12.3-percent rise on December.
April 20th, 2010 at 9:10 pm
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