Talks to provide Greece with emergency funding are going well and the country will be able to finance its public debt without problems, Greek Finance Minister George Papaconstantinou said today.
‘We are all confident that this will be done in time, and we will be able to continue to finance Greek public debt without any problem,’ he told reporters in Washington after meeting the International Monetary Fund and finance officials.
Asked about investors betting on a default by Greece, Mr Papaconstantinou said: ‘All I can say is that they will lose their shirts.’
Meanwhile, Canada said it expects a €45 billion rescue package for Greece to grow in size as doubts emerge over whether the joint EU-IMF aid will be enough to avert a default.
Saddled with huge debt and a swollen deficit, Greece bowed to intense pressure from financial markets on Friday and formally requested aid, triggering what would be the first bailout of a member of the 11-year-old single currency bloc.
Athens has already announced billions of euros in budget cuts, including tax hikes and reductions in public sector wages, but is now in talks with the European Union and IMF on additional steps to get the aid flowing.
IMF Managing Director Dominique Strauss-Kahn issued a statement today saying those talks had accelerated and expressing confidence in Greece's determination to get its economy back on track.
But Canada's Finance Minister Jim Flaherty said the package would end up being ‘more than had been said previously’, declining to specify the amounts being discussed.
German Finance Minister Wolfgang Schaeuble warned Greece that a tough restructuring of its economy was ‘unavoidable and an absolute prerequisite’ if Berlin and the EU were to approve the aid Greece has requested.
Only days after Greece requested the aid, doubts were already emerging over whether the package was large enough to calm market fears of a debt default.
Those fears have pushed the yield on Greek 10-year bonds above 8.7%, a whopping 567 basis points over the rates on benchmark German Bunds.
This has made it prohibitively expensive for Athens to service its mountain of debt. Greece's formal request for aid on Friday did little to ease market pressures.
Majority in Greece believe govt slow to react
A poll released on Saturday showed that roughly two-thirds of Greeks believe Prime Minister George Papandreou's socialist government was either too slow to react or handled the economy poorly as the country's fiscal crisis deepened.
Political pressure has also been heaped on the Greek government as it imposes tax increases and cuts public pay amid strikes and demonstrations.
The IMF is likely to ask for further austerity measures as a condition of its part of the loan.
But time is running out for Greece, which must pay lenders $8.2bn on 19 May or risk becoming the first eurozone country to default on its debt.
Ending yesterday's meeting of the IMF's 186 members, managing director Dominique Strauss-Kahn addressed the Greek public's opposition to the bailout.
‘Greek citizens shouldn't fear the IMF. We are there to try to help them,’ he said.
Mr Strauss-Kahn had earlier promised that the Fund will ‘move expeditiously’ in response to Greece's appeal for help.
The EU has said it sees no ‘obstacles’ to Athens' request to activate a three-year joint EU-IMF rescue, which would offer interest rates of about 5.0%, far below the levels being demanded by private lenders.
Under a deal hammered out with EU leaders on 11 April, the IMF would cover a third of the cost of the loan.
EU economic and monetary affairs chief Olli Rehn said on Friday that EU members had worked intensively on details of a Greek rescue package and ‘should be able to complete the work by early May.’
The stability of the euro - which closed Friday up one US cent at $1.3384 in New York - is at stake as Greece wrestles with debt of around €300bn.
