First loans of Greek bailout deal set to be released

THE EU and IMF plan to release emergency loans to Athens as early as next week as they finalise a series of drastic budget cuts which will intensify pressure on the beleaguered Greek government.

As the government’s talks with the European Commission, the European Central Bank and the IMF neared conclusion last night, officials in Brussels said a meeting of euro-zone finance ministers to sign off on the plan was scheduled for tomorrow.

The imminent deal follows months of politicking over the parameters of the intervention, and Germany’s decision to set aside its reluctance to take part in the effort.

The package could be worth as much as €120 billion over three years – the aim being to settle market nerves over Greece’s deficit and to convince investors that it can service its €300 billion debt. A further concern is to avert the threat of market contagion taking hold in light of fiscal weakness in Spain and Portugal.

But Greek trade unionists have warned they will step up their campaign against cutbacks, meaning premier George Papandreou faces the prospect of escalating street protests as he tries to bring his wayward public finances under control. “Many talk about red lines. The only red line is the country’s interest. Today, the top priority is the survival of the nation. This is the red line,” Mr Papandreou said. “The measures we must take . . . are necessary for our country’s protection, for our future, for us to be able to stand on our feet.”

The budget stabilisation plan could trim some €24 billion from Greek government spending, with measures including a rise in the average retirement age to 67 from 53. "Armageddon is coming," said the conservative daily newspaper Eleftheros Typos.

While the plan’s severity is designed to harness German support, the new austerity measures raise the prospect of an escalation in the government’s confrontation with the country’s unions.

“We want to help the country exit the crisis, but if the government continues with these policies that hurt workers only, we have no other choice but to oppose them with all our might,” said Ilias Iliopoulos, head of the Adedy union.

Following a series of general strikes in Greece, the threat of further disruption and social unrest in a country with a history of violent protest could undermine Mr Papandreou’s efforts to execute the plan.

As expectation intensified that the package was close to completion, the euro strengthened and oil rose. The euro gained against 13 of its 16 most-traded counterparts in early New York trade, and the cost of insurance to protect any Greek default fell 0.49 points to 6.212 per cent after hitting record levels.

Having played for time over the rescue this week, Germany signalled that European banks will contribute to the Greek rescue.

Deutsche Bank chief Josef Ackerman was reported to be helping to co-ordinate German private sector efforts to raise between €1 billion and €2 billion for Greece with the aim of convincing the markets that private business is taking the rescue seriously.

Vice-chancellor Guido Westerwelle compared the requirement for private sector support for Athens with Berlin’s plans for a levy on banks to protect taxpayers from future financial crises.

“I expect that, just as in Germany, banks will participate in the consequences of the economic and financial crisis through the famous bank levy that we agreed upon in the government, so also in Europe banks will want to make their contribution and will do so,” he said.