IMF experts are advising Greece on
how to enact painful budget cuts but market doubts on the country’s ability to
raise money to pay its bills kept borrowing rates high and drove down the euro.
The IMF advisers began a two-week
mission to Athens with meetings at the finance ministry, with markets in
turmoil over Greece’s next fund-raising steps to slash a massive budget deficit
and stay abreast of loan repayments.
The deteriorating climate has also
spooked Greek banks, with Bank of Greece governor George Provopoulos telling
the finance ministry the country’s four main lenders had applied to join a
state support scheme.
“The whole Greek economy and
the banking system are under pressure so one needs to have the assurance of
additional guarantees,” a finance ministry source said.
At Credit Agricole CIB, analyst
Stuart Bennett said the euro continued to be undermined by the situation in
Greece, which faces a deepening dilemma of huge debt, dangerously high interest
rates and damaging market rumours.
The IMF mission was requested by
Greece as it battles huge budget deficits and a debt mountain of nearly $402
There is also concern that Greece’s
crisis measures are based on estimates that are rapidly being outpaced by the
country’s deepening recession.
The finance ministry has already
been forced to revise its estimate on the economy’s shrinkage in 2009 from 1.2
per cent to 2.0 per cent.
On 22 April the European Union’s
statistical agency Eurostat is expected to announce that Greece’s public
deficit in 2009 will be higher than the 12.7 per cent of gross domestic product
announced by the government, Greek news reports said.
One report, belatedly denied by the
authorities, suggested that Greece was having second thoughts about any formal
IMF involvement in a joint financial rescue with the European Union because of
tough conditions the fund might impose.
Greece desperately needs tens of
billions of US dollars of loans at an affordable rate to be able to repay
maturing debt in coming weeks and months.