Greeks say bailout will finance debt for a year

GREECE IN CRISIS:GREECE IS unlikely to return to the international capital markets before next year and will use funds from its international €110 billion emergency rescue package to finance its debt in the meantime, its finance minister said yesterday.

George Papaconstantinou said: “The whole idea of the programme is to shield you, but help you return to markets as soon as possible, so we’re hoping that next year we’ll be doing that.

“The amount available to us is such that we don’t have to go back to the markets until the first quarter of 2012.”

He spoke as thousands of striking public sector workers protested outside parliament, where deputies were debating an austerity programme agreed in return for the bailout by euro zone partners and the International Monetary Fund. According to IMF officials, Greece needs to spend about €150 billion over the next three years to refinance debt, make repayments and cover interest.

Pressure from financial markets has forced Greece to become the first member of the euro zone to seek this help from the IMF. The decision marked a humiliating climbdown by the socialist government of George Papandreou, which had launched three earlier fiscal packages and pledged to accelerate structural reforms.

“We made mistakes,” Mr Papaconstantinou admitted. But he insisted the new package showed determination to tackle the crisis and climb out of recession.

Greeks put most of the blame for the soaring deficit and public debt on the previous conservative government, which hired about 100,000 additional civil servants and boosted public spending by more than €20 billion during five years in office.

The new measures will plunge Greece deeper into recession, with the economy set to contract by 4 per cent this year and another 2.6 per cent next year before growth returns in 2012.

Reforms of the tax and pension systems and the opening up of labour markets are intended to reduce the role of the bloated public sector and free up resources for growth.

The government is stepping up a campaign against tax evasion and corruption in an attempt to deflect popular anger. The finance ministry has accelerated procedures for tax audits and the opening of accounts held at Greek banks by suspected tax evaders.

Separately French finance minister Christine Lagarde has said it is “indiscriminate and random” to compare Greece’s debt crisis to the financial situation in Ireland, Spain and Portugal.

France’s lower house approved the French portion of the aid package for Greece, which calls on Paris to lend Athens up to €16.8 billion over the next three years.

“One must avoid comparing what is not comparable,” Ms Lagarde said in response to a deputy’s question. “There is a distinctive feature to Greece, which is the absence of reliable statistical data, clearly groundless figures and a serious confidence deficit.” – (Copyright The Financial Times Limited 2010)