Tags: EU | Greece | Financial | Crisis

Greece Pays Creditors $10.43 Billion Using EU Rescue Loans

Wednesday, 19 May 2010 10:39 AM

Cash-strapped Greece managed to pay off its creditors Wednesday — warding off bankruptcy in the nick of time — by using billions of euros from the EU-led rescue package aimed at containing the debt crisis.

Finance ministry sources said the government redeemed 8.5 billion euros ($10.43 billion) in expiring 10-year state bonds, which it was unable to raise without outside assistance as wary investors have sent Greek borrowing costs sky-high.

Just a day earlier, the country had received 14.5 billion euros ($18 billion) from 10 of the other 15 European Union countries that use the euro. The loans are part of a 110 billion euro ($136 billion) joint EU and International Monetary Fund rescue package.

Greece's debt crisis sent shockwaves through global markets and, combined with fears for Europe's struggling economy and German warnings that the future of the euro itself was at stake, sent the common currency to a four-year low against the dollar Wednesday.

Athens received the first 5.5 billion euro tranche from the IMF last week, and the second and final installment for this year — an estimated 18 billion euros ($22 billion) — is expected in the autumn.

Prime Minister George Papandreou said the bailout had earned the heavily indebted country, whose public finances lie in tatters after years of state overspending, waste and rampant tax evasion, time to sort itself out fiscally.

"This ... gives us this opportunity to breathe and to take the big initiatives for institutional changes in our economy and in the structure of our state itself," Papandreou said.

To secure the foreign loans, his center-left government took a hatchet to pensions and civil service pay, while pumping up consumer taxes, increasing retirement ages and pledging to fight corruption and tax cheats.

The country's budget deficit reached 13.6 percent of annual output last year, while its public debt is expected to reach 133.3 percent of gross domestic product in 2010.

"These changes need to be made, but they must be made with the citizen and not against the citizen," Papandreou said.

"We are going towards a model of sustainable development, using the wealth that our country possesses, investing in new technologies, in new products, in order to ensure that we emerge from the crisis as quickly as possible, in the least painful possible way for our citizens."

But Greece's war on tax evasion suffered an embarrassing setback on Tuesday, when the deputy tourism minister, a former actress who has posed naked for a men's magazine, had to resign after it emerged that her husband, a popular singer, owes millions of euros in unpaid taxes

Papandreou on Wednesday appointed Giorgos Nikitiadis, a deputy for the Dodecanese Islands region, as Angela Gerekou's replacement.

Gerekou's resignation came at a crucial time for Greece's tourist industry — one of the country's top earners. The main tourist season got off to a rocky start this month following recent mass hotel booking cancellations sparked by concern over violent demonstrations in the capital.

Labor unions have staged a series of walkouts against the cutbacks in recent months. Three people died during a strike on May 5, trapped in a burning bank torched by protesters when a demonstration in Athens turned violent.

Another general strike set for Thursday is to shut down all public services and disrupt public transport.

Schools will shut down, state hospitals will function on emergency staff, and all ferries will remain tied up at port. However, air traffic controllers will stay on the job, leaving the country's airports open, and journalists also pulled out, saying they would cover the events and set another date go on strike.

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Cash-strapped Greece managed to pay off its creditors Wednesday warding off bankruptcy in the nick of time by using billions of euros from the EU-led rescue package aimed at containing the debt crisis.Finance ministry sources said the government redeemed 8.5 billion...
Wednesday, 19 May 2010 10:39 AM
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