Greece needs help to beat its crisis and there is a risk it will fall into a "death circle" of recession and falling budget revenue if its borrowing costs stay high, financier George Soros told Greek Skai TV on Monday.
Athens hopes to begin talks with European and International Monetary Fund officials on Wednesday on a policy program that investors are increasingly convinced will lead the debt-ridden country to tap what would be the biggest bailout ever attempted.
Soros said the spike in Greek bond spreads — the premium investors pay to buy Greek debt instead of equivalent German bonds which hit a euro lifetime high on Monday — was caused in part by market speculation.
But he added the main issue was Greece's very real economic problems and it had effectively already set a plan in motion to tap aid comprising 30 billion euros from euro zone states and up to 15 from the IMF in the first year.
"I think it is necessary because the market interest rate is really far too high to make it possible for Greece to meet the conditions that are required of it," the billionaire told Skai's Folders news show, according to a transcript provided to Reuters.
Soros said it was regrettable that Germany had insisted on an interest rate of as much as 5 percent for the aid package because it would water down the bailout's impact.
There was a "real danger" that such a high rate would cause Greece to cut its budget further, hurting economic activity and eventually undermining budget revenues, he said.
"Then it becomes a vicious cycle," he said. "I would call it a death circle. That's really the danger."
German voters oppose helping Greece and Berlin has resisted giving the aid a green light and says it could send the wrong signal to countries that flout EU budget rules.
Soros said he thought the IMF would be satisfied with Greek deficit-cutting reforms thus far, which include public wage cuts, tax hikes and a pension freeze.
He said a restructuring of Greece's debt would be a desirable way out of the crisis, but that it would not be possible because Greek banks hold so much government debt.
"If you had a default or rescheduling you may have a banking crisis, so it seems to me that there is actually no practical alternative to what the government is currently doing," he said.
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