It may get €45 billion this year, but Greece could need another €35 billion in the next two years, writes ARTHUR BEESLEYEuropean Correspondent in Brussels

GREEK PRIME minister George Papandreou went to the sunny Aegean island of Kastelorizo to tell his people he wants to draw down an EU-International Monetary Fund (IMF) aid package that could be worth as much as €45 billion. The move finally sets in motion one of the largest sovereign rescues yet seen.

The decision to trigger the aid takes Papandreou’s storied country and its benefactors in Europe and Washington on to porous ground that none of them would enter by choice. But the Greek leader was out of options – and the EU leaders who pledged help if the evil day ever came must now make good on promises they never wanted to keep.

Only with time will it be seen whether the rescue – an event without precedent in the euro zone – sets Greece on the path to long-term stability.

Roiled by the markets as he struggled to raise billions to keep the Greek state afloat, Papandreou saw his interest costs enter the stratosphere this week.

Before his television address yesterday, the price on Greek short-term debt reached the same level as Pakistan. The game was up. In reality, it was up long ago, politicking over the rescue being the outwork of an impossible dilemma.

Questions abound. At issue straight away is how quickly the EU and IMF authorities can release the flow of bilateral loans to Athens. On this front we can expect action very soon. Under the procedure agreed by euro- group leaders, the European Commission and European Central Bank (ECB) must first assess whether Greece has met the conditions for special aid. The commission says this will happen in days.

The idea is that the EU executive and the ECB would prepare a decision for unanimous adoption by the leaders of the 16 euro members. Whether the leaders convene an emergency summit remains to be seen, although finance and transport ministers have taken important decisions on Greece and the volcanic ash crisis by phone conference in the past fortnight. Either way, it is only with leaders’ approval that loans can be issued.

The system was designed to ensure that the release of funds is not automatic, but a drawdown in some form looks like something of a done deal. Yes, the commission and the ECB have the freedom to say the conditions for last-ditch aid have not been met. In reality, however, Papandreou is so far down the road to rescue that any rebuff would trigger a catastrophic flight from Greek assets. There would be no resort other than the last one.

Within days, too, we can expect the conclusion of a new austerity programme to which Greece will have to subscribe in return for funding. Budget cuts are already deep, but further pain looms next year and in 2012.

The current cuts, made at the EU’s behest, have brought hundreds of thousands of protesting Greeks on to the streets. With officials from the IMF now in Athens, the drive to pare back the deficit will intensify.

This has fanned market concerns that a rescue could deepen Greece’s recession, making it more difficult for the country to keep servicing its €300 billion debt. The country’s requirements are enormous. It may receive €45 billion this year from its euro partners and the IMF, but it could need another €35 billion in the next two years. The response from markets to news of the aid application was less than euphoric.

As for the practicality of releasing loans, the expectation is that euro states will borrow the money they lend to Greece. This will be the approach in Dublin, where the Government anticipates a profit from the loan. Legislation will be required, however.

Some countries will be ready to participate before others; these include Italy and the Netherlands, sources say. Legislation is also required in Germany, although this may the least of the worries over the rescue that beset chancellor Angela Merkel.

She faces dissent in her government, rising public opposition, a constitutional court challenge and a crucial state election on May 9th. She played for touch yesterday, saying there would be no aid until it was divined that the plight of Greece represented a risk to the whole euro zone.

While her finance ministry said Berlin was ready to act, Merkel is in a delicate place. How she resolves these tensions will be crucial to the plan.

So too will be the market’s stance on other fiscally weak, debt-reliant euro members such as Spain and Portugal. Ireland, which had enjoyed a brief spell outside the sinner’s club, returned there with a vengeance two days ago when the first Anglo Irish Bank bailout led to a massive upward revision in the budget deficit.

For sure, the other euro weaklings are not in the same parlous place as Greece. But that country’s capitulation has shown in increasingly dire terms that membership of the single currency is not necessarily the impenetrable coat of armour it was long held to be.