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Greece At The Precipice, Awaiting EU-IMF Loan

Greek Finance Minister George Papaconstantinou: "This is not a country of international cheats."
Time is running out for Greece to gain access to a multibillion-euro loan if it is to avoid default on its international debts.

The EU's eurozone members and the International Monetary Fund are offering a total of 45 billion euros ($61 billion), but the largest eurozone contributor, Germany, is continuing to hold out for the Greek government to commit to an austerity program with more rigor and detail before it will release its share.

Speaking to journalists on April 26, German Chancellor Angela Merkel said Berlin won't part with a cent to help Athens unless the Greeks come up with a viable, multiyear plan for living within their means.

"I say this very clearly," Merkel said. "Germany will help if the preconditions have been met. This will take a few more days and needs to be discussed with calm consideration, with proper deliberation, and with decisiveness. Because it is only if this program is effective in the long term that we have a chance to secure the permanent stability of the euro.

"Germany feels hugely responsible for the stability of the euro. We will contribute our part. But this is not possible if Greece does not also do its part."

How To Raise Cash

Safeguarding the euro is uppermost in Merkel's mind, as the common currency used by 16 EU members would be undermined with unforeseeable consequences if Greece defaulted.

What is a priority is first, we of all people have to believe that there is an exit to our problems.
Greek Finance Minister George Papaconstantinou, however, is preoccupied with a more immediate problem -- namely, how to raise the cash for the next big debt repayment.

"There is a crucial date for Greece and it is May 19 -- the day when it must repay a maturing bond of about 9 billion euros," Papaconstantinou said. "Until then, our borrowing needs are covered, but conditions in markets today, I think all of you realize, are totally prohibitive for borrowing."

He's right about the markets, which are still doubtful whether Greece can pull through the crisis without defaulting. As a consequence, investors are demanding impossibly high interest rates to buy Greek bonds. On financial markets on April 26, the yield on 10-year government bonds soared to 9.4 percent -- its highest level since Greece joined the eurozone in 2001. By comparison, the interest rate for similar German bonds, considered the safest in the EU, is only 3 percent.

And the "Financial Times" daily quoted market experts as saying two-year Greek government bonds were yielding 13.5 percent -- the highest yield on short-term bonds anywhere in the world.

'Run In The Right Direction'

Responding to Merkel's concerns on April 26, Papaconstantinou said Greece would announce additional "specific measures and policies" to limit public deficit and debt as soon as talks on the loan package were finished. He said he realized that Greece must drastically cut its deficits in coming years and make structural adjustments to make the Greek economy more competitive.

And he put in a plea for Greece's reputation, which has taken a battering from the universal perception that Greeks themselves are to blame for getting themselves into such a dire mess.

"This is not a country of international cheats," he said. "This is not a country that wants to live in debt at the expense of the European taxpayer. But of course, this is not a country without possibilities. It is a country that can, a country that has shown it can in the past, and when it stands on its feet it can run in the right direction. What is a priority is first, we of all people have to believe that there is an exit to our problems."

His appeal for domestic support is timely, as opposition to the strong economic medicine is growing among Greeks.

The latest to show their discontent at a loss of income are the country's military pilots, hundreds of whom called in sick today and did not fly.

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