Tags: EU | Europe | Financial | Crisis

Greek Premier Rules Out Bailout, Urges EU Solidarity

Friday, 19 February 2010 02:16 PM

Greek Prime Minister George Papandreou told other European leaders Friday that Greece intended to solve its debt crisis on its own, as the government replaced the head of its debt management agency ahead of key moves to refinance its massive deficit.

The news that Petros Christodoulou, former head of asset management at the National Bank of Greece, will take over from Spyros Papanicolaou comes as financial markets continue to fret about the Greek government's ability to pay off its debt.

Those worries have undermined confidence in the 16-country euro currency.

The Finance Ministry did not give a reason for the appointment in its announcement late Thursday.

Greece has taken a hammering in markets in recent months, after the new government sharply revised the budget deficit shortly after the elections to 12.7 percent of gross domestic product from a 3.7 percent forecast months earlier — sending Europe into a new phase of the financial crisis over mounting debts by Greece and several other euro-zone countries.

Spreads of Greek government bonds over the equivalent German benchmark bonds — a key indicator of the market's perception of a risk of default — have spiraled in recent weeks, and stood at 326 basis points on Friday afternoon.

Papandreou reiterated in London that Greece's troubles were "our responsibility" and that Greece was not seeking a bailout.

But he said Athens' woes affected all and that the country needed the support of its partners in the EU.

"Higher interest rates for us means higher interest rates for Europe ...What we are simply saying is we'd like to borrow on the same terms as other countries in the European Union and the euro zone," Papandreou said at a conference of socialist leaders.

The Prime Minister would not be drawn onto whether Greece was preparing a multibillion euro bond issue next week as around 20 billion euros of its debt needs to be refinanced in April and May.

There is mounting speculation in the markets that Greece will begin looking to tap investors before the end of February to take advantage of improved market conditions — last month the spread over German bonds stood at around 400 basis points.

Papandreou repeated his view that the country was not looking for a bailout from its partners in the 16-country eurozone but "simply saying we have a program and we need support for this program."

Papandreou's government has pledged to cut its budget deficit by four percentage points in this year alone.

Papandreou also met with British Prime Minister Gordon Brown and Spain's premier Jose Luis Rodriguez Zapatero, as well as Foreign Secretary David Miliband — in addition to being Prime Minister, Papandreou also holds the foreign affairs brief.

Zapatero, whose government is also facing pressure in the markets to bring down its budget deficit, gave Papandreou support and said deficits across Europe would come down once the recovery from recession was firmly established.

"Of course we are going to reduce the deficits.....we are not going to fall in the trap of the ideas of those who have created the financial crisis," he said.

"The large majority (of Greeks) has no responsibility for what has happened, and much less Papandreou's government..it deserves the trust of European institutions, of the markets and he has the trust of all the European governments," Zapatero added.

Back in Athens, Greek drivers lined up for gas at the few stations still open Friday as a customs strike against government austerity measures left many pumps running dry.

The fuel shortage was the first serious consequence of growing labor protests against the government's emergency cuts, aimed at easing the debt crisis in Greece and shoring up market confidence.

Customs workers have extended their strike against salary freezes and bonus cuts through next Wednesday, when unions across Greece will hold a general strike that is set to bring the country to a standstill.

Athens has come under intense pressure by its European Union partners to bring its finances under control and explain the use of financial deals known as currency swaps and how they affected the country's debt and deficit figures.

Greece has announced a series of harsh austerity measures and says the swaps debt deal, made with U.S. investment bank Goldman Sachs, was above board and will be explained in a letter being sent by the finance minister to the European Union.

The EU's top economy official, Olli Rehn, gave the Greek government until Friday to supply answers on the use of the currency swaps.

"There will be a response. There is a letter by the Finance Minister," government spokesman Giorgos Petalotis said, adding it would "most likely" be sent on Friday.

EU officials said however that the letter had not been received by early Friday evening, and that once they received the letter, time would be needed to analyze its contents.

Earlier this week, European finance ministers warned Athens it would have to impose even tougher budget cuts if its current austerity program can't reduce the deficit to 8.7 percent this year. Athens has until March 16 to report back to the EU on its progress.

European Commission spokeswoman Amelia Torres said Rehn will visit Greece "before the middle of March." She did not elaborate, but the timing of the visit seemed designed to step up the pressure on Athens.

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Greek Prime Minister George Papandreou told other European leaders Friday that Greece intended to solve its debt crisis on its own, as the government replaced the head of its debt management agency ahead of key moves to refinance its massive deficit.The news that Petros...
Friday, 19 February 2010 02:16 PM
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