Concerns about Borrowing Costs Greece Asks for Details on EU Aid Plan
Athens has asked the European Union for details on how it might bail out Greece should the need arise, saying that without specifics, the cost of refinancing 53 billion euros of Greek debt will be much higher. Meanwhile, some Greek politicians have gone on the attack -- against Germany.
Last week, finance ministers from countries belonging to Europe's common currency zone promised to help prevent Greece from sliding into insolvency if need be. This week, Athens is asking its fellow euro-zone states to provide specifics on how that might be done.
Were the EU pledge to be backed by a clearly enunciated plan, Greece says, costs for refinancing 53 billion in debt this year -- 20 billion of which must be refinanced in April and May -- would fall. That, said Greek Finance Minister Giorgos Papakonstantinou in an interview with Reuters, would make it easier for Greece to shrink its budget deficit by four percentage points as promised. And it could also obviate the need for a bailout package in the first place.
The plea from Athens comes just days after European Union finance ministers ratcheted up the pressure on Athens to initiate a radical austerity program. The country's budget deficit currently stands at almost 13 percent of GDP -- more than four times the level allowable by euro-zone rules -- and is carrying 300 billion in public debt. Euro-zone finance ministers approved Greece's austerity program on Monday evening, demanding that Athens submit a progress report on March 16.
"It if becomes clear that Greece is in danger of not reaching its goal of reducing its 2010 budget deficit by four percentage points, then the Greek government would have to propose further measures," said Jean-Claude Juncker, who heads up the committee of euro-zone finance ministers.
Tiring of the Beating
Moody's credit rating agency has estimated that Greece will have to reserve 15.1 percent of its 2010 revenues just to service its debt. Currently, Greece must pay 334 basis points more than Germany, which is used as a benchmark, to borrow money -- up from a gap of just 8 basis points in 2005.
But even as the Greek government begins implementing measures to bring down its budget deficit, some in Athens are tiring of the beating their country is taking in European Union public opinion. On Thursday, some in the opposition went on the offensive -- and lambasted Germany.
"How does Germany have the cheek to denounce us over our finances when it has still not paid compensation for Greece's war victims?" Margaritis Tzimas, of the conservative New Democracy party, demanded in an address to parliament. "There are still Greeks weeping for their lost brothers."
Tzimas was speaking during a parliamentary debate on how best to reform Greece's statistical service. Details have recently emerged regarding Athens' efforts to hide debt to qualify for joining the euro zone -- tactics that included complicated currency swaps midwifed by Goldman Sachs. Greece said on Thursday that the deal was legitimate and will send a letter of explanation to the European Union, fulfilling a demand by the new European commissioner of economic and monetary affairs, Olli Rehn.
Other Greek lawmakers also took on Berlin, with six members of a small leftist party called the Left Coalition asking the government to bring up the reparations issue with Germany and blaming German banks for Greece's crisis. "By their statements, German politicians and German financial institutions play a leading role in a wretched game of profiteering at the expense of the Greek people," the deputies wrote in a statement to government, according to Reuters.
cgh -- with wire reports