The Greek government pushed the
button on an emergency financial bailout package Friday, formally acknowledging
that it needs loans from its European neighbours and the International Monetary
Fund to avoid a humiliating bankruptcy.
In a nationally televised address, Greek Prime Minister George Papandreou told
his countrymen that activating the low-interest loans worth up to $56 billion
had become a “national necessity” if the government is to keep on
paying its bills.
The move came after weeks of insistence by Athens that it would not have to
resort to such loans, which it characterized as more of an insurance policy to
soothe skittish investors. But global markets were not satisfied, pushing up
Greece’s cost of borrowing to unsustainable levels this week and forcing Athens
to bow to the inevitable.
“We thought that this support mechanism would calm markets enough for us
to raise the money we needed to meet borrowing requirements,” a somber
Papandreou said in his address from the remote Greek island of Kastellorizo.
“The markets, though, did not respond.”
Money from other European Union member states and the IMF could start pouring
in within days.
But Athens’ yawning budget deficit, as well as similar woes in Ireland, Spain
and Portugal, continues to put the European-wide currency under severe strain.
The debt crisis is the euro’s biggest test since it was launched in 1999.
The crisis also has strained diplomatic relations within the Eurozone, the club
of 16 nations that use the currency. Germany, the continent’s economic powerhouse,
has strongly resisted the idea of extending aid to Greece, whose economic woes
Berlin blames on Athens’ own profligate spending and disingenuous accounting.
At German insistence, the rescue package hammered out a few weeks ago offers
about $41 billion in loans from Eurozone countries at an interest rate of about
5 per cent, better than what Greece would find on the open market but not as
preferential as Athens might want.
The deal also brings in the IMF, which would supply about $15 billion, and possibly
slightly more if warranted.
Greek trade unions reacted with
dismay and vowed to step up strike action.
“Social resistance and
accelerated strike action form the course that can provide hope and certainty
in our life,” said Spyros Papaspyros, head of the umbrella civil servant union.
His union, ADEDY, planned a protest against the IMF on Tuesday.
More than 2,000 people took part in
a demonstration in central Athens Friday evening against the prospect of
further austerity measures. Minor clashes broke out when some demonstrators
threw stones at riot police, who responded with pepper spray. Officers detained
about 10 people.