Pressure mounts on Germany to aid Greece
Pressure piled on Germany to stop stalling a package to rescue Greece from crippling debts Wednesday as the International Monetary Fund's chief said confidence in the whole eurozone was on the line.
As the euro hit a one-year dollar low after Greek debt was slashed to junk, the country's prime minister said a "common effort" was needed from the EU and eurozone to prevent world economies from being engulfed by a new crisis.
Greece acted to stop speculators operating on the Athens stock exchange as the interest rate it has to pay to borrow money hit 11.1 percent, only trailing Pakistan and Venezuela in the world's highest interest payers.
And the Athens government faced growing domestic discontent with new strikes erupting and protesters blocking tourists on one cruise ship.
Herman Van Rompuy, the European Union's president, said the bloc's leaders would meet on May 10 and talks were advancing to enable Greece to tap up to 45 billion euros (60 million dollars) in loans from the EU and the IMF.
But European Central Bank President Jean-Claude Trichet warned time was fast running out and Germany must quickly decide whether to contribute its share.
"There is an absolute necessity to decide very rapidly," Trichet told reporters after meeting German Finance Minister Wolfgang Schaeuble, IMF chief Dominique Strauss-Kahn and top German parliamentarians.
Strauss-Kahn struck a similarly ominous note, saying: "It is the confidence in the whole (euro)zone that is at stake."
With opinion polls showing strong opposition within Germany to handing over cash to the Greeks, Chancellor Angela Merkel says Berlin will only contribute when Greece comes up with a firm plan to bring its finances in order.
Merkel, who is being asked to come up with some 8.4 billion euros, faces a key regional election on May 9 and analysts say she is wary of having her hand forced ahead of the polls.
In comments likely to fuel increasing public sentiment against Greece, the head of one of Germany's top economic institutes warned that Athens would not pay Berlin back and a bailout would only prompt more demands for German cash.
Asked on MDR radio if Germany would ever get its money back, Hans-Werner Sinn, head of the Ifo institute and one of the top advisors to the government, said: "To tell you the truth, no."
He also said that it would also be "understandable" if other countries such as Spain, Portugal, Ireland and Italy would see the bailout of Greece as a precedent and ask for money themselves.
In comments likely to heap further pressure on Merkel, French Prime Minister Francois Fillon, whose country is expected to be the second biggest contributor to an eventual package, said she was about to come on board.
"I have no doubt she will take exactly the same position as the French government and all the other European states," to make huge loans to help Greece, he told lawmakers.
Greece has seen its cost of borrowing soar as investors, fearing a default, have demanded greater risk premiums for their loans, which in turn has pushed the country's debt even higher.
The public deficit rose to 13.6 percent in 2009 and its debt reached 273.4 billion euros, or 115.1 percent of output, the EU data agency said last week.
The decision by ratings agency Standard & Poor's to slash Greece's credit status to junk levels on Tuesday means certain investors such as pension funds can no longer buy Greek bonds.
The Athens government's most pressing problem is to find nine billion euros to pay debt maturing on May 19.
Greek Prime Minister George Papandreou said a "common effort" was needed from the EU and eurozone to prevent world economies from being burnt.
"The European Union and the eurozone, a common effort, must prevent a fire that flared up with the global crisis from spreading to the entire European and world economy," Papandreou told a cabinet meeting.
But with the General Workers Confederation announcing a general strike for May 5 against "neo-liberal blackmail" by the EU and IMF, the Greek government is still holding out against proposals by the EU and IMF to cut salaries.
"We have been asked for a cut which we do not accept. Neither we as a state, nor our social partners," Labour Minister Andreas Loverdos said.
Greek radio technicians launched a 48-hour strike on Wednesday, halting news broadcasts, while disgruntled applicants for civil sector jobs protested outside the finance ministry and teachers also launched stoppages.
© 2010 AFP