Greek debt reaches record 300 billion euros
Athens -- Greece said its debt stood at a record 300 billion euros on Thursday as the prime minister called an all-party crisis meeting to calm alarm on financial markets and throughout the eurozone.
The admission of the scale of the crisis came as a top official at the European Central Bank (ECB) said there could be no specific bailout from other eurozone countries, but Germany said the EU shared a common responsibility.
"The country’s debt has reached 300 billion euros (442 billion dollars), which is the highest level in our country’s modern history," Deputy Finance Minister Filippos Sahinidis told lawmakers shortly after Prime Minister George Papandreou convened the all-party crisis meeting to pull the nation together.
The newly-elected socialist premier, who is under huge pressure to slash spending, said the government was ready to "clean up" its economy, having warned earlier that debt was a threat to the nation.
"At this point a national rally is required to solve these problems," Papandreou told Greek President Karolos Papoulias.
Papandreou said that the meeting, set for next week, is aimed at "sending a powerful message abroad showing that we’re determined to move forward, to clean up our economy and … give hope to every Greek citizen."
The head of the ECB Jean-Claude Trichet has called repeatedly for "courageous steps" from Greece, after a series of downgrades of Greek debt amid growing alarm that the country may be heading towards bankruptcy.
In Vienna, ECB governing council member and Austrian central bank chief Ewald Nowotny, asked if Greece could become a test for the entire eurozone, replied: "No, I do not see this in any way."
He said: "An exit or something similar from the eurozone would be totally unrealistic for Greece, and also not do-able."
But he also warned: "The ‘No bailout’ principle is anchored in the EU treaty and has to be taken absolutely seriously. It is not possible to defuse the problem here through direct financing."
In Bonn, the president of the eurogroup of the 16 eurozone finance ministers, Jean-Claude Juncker, said the budget situation in Greece was "tense" but the country should avoid bankruptcy.
The crisis was to be debated by EU leaders at a summit in Brussels.
"It is not formally on the agenda, but I guess prime ministers will relate to the matter informally, because the situation in Greece is very serious," said Swedish Foreign Minister Cecilia Malmstroem.
"We are in a family, we try to support each other," she underlined.
German Chancellor Angela Merkel said the European Union shared a "common responsibility" for Greece.
"What happens in a member country influences all the others, particularly when you have a common currency," she said.
Greek stocks came back to life after shedding almost 10 percent of their value over two days following ratings agency downgrades of government debt bonds.
But official statistics released later in the day showed unemployment rising to 9.1 percent in September on an annual basis with over 450,000 people out of work. Youth unemployment is high and is a highly sensitive issue. Industrial production also slumped 9.2 percent in October on an annual basis.
The government is seeking to reassure financial markets and investors who lend money to Greece that new budget proposals to cut spending will be produced within six to seven weeks.
Its credibility has been damaged by the revelation that the public deficit is expected to surge to 12.7 percent of output this year and that debt amounts to 113 percent of gross domestic product.
Many analysts have warned that the crisis in Greece exposes great strains within the eurozone, and also the challenges which many European governments face in reducing budget deficits in time to satisfy markets without strangling economic recovery.
Greece’s sovereign debt was downgraded on Tuesday by the international ratings agency Fitch, prompting financial market jitters.
On the European government debt market, Greek bonds were being priced to show a yield or interest rate of 5.471 percent, compared with 3.163 percent for benchmark eurozone debt issued by Germany. This so-called spread means that Greece would have to pay 2.307 percentage points more than Germany to borrow now.
Internal eurozone worries are now beginning to extend to Ireland and Spain, which have each received warnings from the ratings agencies. Standard and Poor’s has also since cast doubts over Portugal’s prospects.
The affair has put significant downward pressure on the euro on international foreign exchange markets.
Finance Minister Georgios Papaconstantinou told French newspaper Le Figaro newspaper that the Fitch downgrade had "hurt" but blamed the problems on the previous government.
Gilles Moec, senior economist at Deutsche Bank, said of Greece’s sovereign debt ratings that "there are still quite a few notches to go before it becomes a natural issue for refinancing at the European Central Bank."