Greece asks for EU-IMF bailout

[April 23, 2010]  ATHENS, Greece (AP) -- Greek Prime Minister George Papandreou called for the activation of a joint eurozone-International Monetary Fund financial rescue to pull his country out of a major debt crisis.

Papandreou, saying market pressure threatened to derail the country's economy, announced Friday he had asked Finance Minister George Papaconstantinou to make a formal request for the plan's activation.

The plan aims to cover Greece's immediate borrowing needs so it can continue servicing its debt and avoid default. The bailout would have to be reviewed by the European Union executive and the European Central Bank, and needs approval by all 15 of the other governments that use the euro.

"The moment has come," Papandreou said, speaking from the remote Aegean island of Kastelorizo.

"It is a national and pressing necessity for us to formally ask our partners for the activation of the support mechanism, which we jointly created in the European Union," he said.

Papandreou said the markets had not responded positively to Greece's austerity measures that were designed to pull the country's disastrous finances into line.

"Today, the situation in the markets threatens to deconstruct, not only the sacrifices of the Greek people, but also the smooth course of the economy," he said.

The rescue package will provide Greece with loans from other eurozone countries to the tune of euro30 billion at interest rates of about 5 percent, and about euro10 billion from the IMF.

Until now, Greece's Socialist government had insisted it preferred to tap bond markets for its borrowing requirements and avoid calling for a rescue.

But on Thursday, borrowing costs spiraled to alarming and unsustainable levels, pushing interest rates for Greek 10-year bonds to nearly 9 percent.

The spike came after after Moody's credit agency downgraded the country's sovereign rating and the European Union's statistics agency Eurostat revised Greece's budget deficit in 2009 to 13.6 percent of gross domestic product from 12.9 percent, and said it could be further revised by up to 0.5 percentage points.

The level is more than four times the EU limit set for the 16 countries that use the euro, which has been badly hit by the Greek financial crisis. Athens insisted its target of reducing its deficit by at least 4 percentage points in 2010 remained unchanged.

The interest rate gap, or spread, between Greek 10-year bonds and German ones -- considered a benchmark of stability -- began to narrow on the announcement that Athens was asking for the aid, falling to 5.32 percentage points from Thursday's alarming highs of 5.86 percentage points.

[Associated Press; By ELENA BECATOROS]

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