Emergency loans likely for Greece, official says

[April 26, 2010]  WASHINGTON (AP) -- A top Greek economic official sought to shore up confidence among investors that Greece would avert a crippling debt default by securing billions of dollars in emergency loans from European countries and the International Monetary Fund.

Caption: International Monetary Fund Managing Director Dominique Strauss-Kahn appears at a press conference at the end of the second day of the G-20 meeting of finance ministers and central bank at the World Bank headquarters in Washington on Saturday. (AP photo and Cliff Owen)

Greek Finance Minister George Papaconstantinou also warned market speculators "they will lose their shirts" by betting against Greece.

Papaconstantinou said in his Washington news conference on Sunday that he had no doubt that at the end of intensive negotiations that are continuing Monday in Athens and over the next two weeks, Greece will win the loan support it needs from both the European countries and the IMF.

"We are all confident that this will be done in time and we will continue to be able to finance Greek public debt without absolutely any problem," Papaconstantinou told reporters.

Papaconstantinou said he expected the IMF board would approve its portion of the loan support within the first 10 days of May and that approval would be in time to meet a payment of $11.3 billion on Greek bonds due on May 19.

He said that he expected the support from the IMF and the European governments to be provided at the same time but he said if some European parliaments were delayed in approving their contributions, the IMF support could be used to obtain bridge financing from other sources.

Greece is hoping to obtain emergency loans of about $40 billion from the group of 16 European countries that, like Greece, use the euro as a common currency, and an additional $13.4 billion from the IMF.

The Greek government has already agreed to put in place painful austerity measures to trim government spending and public pensions, but it was likely that the IMF and the euro-zone governments will require even tougher measures in return for assistance.

The IMF's managing director, Dominique Strauss-Kahn, expressed similar optimism, saying the IMF and European government recognized the "need for speed" because of Greece's escalating problems and the adverse impact it was having on financial markets around the world.

"We are all aware of the seriousness of the situation and the courageous efforts being made by the Greek people," Strauss-Kahn said in a statement.

Greece's debt crisis weighed heavily on financial leaders as they wrapped up a series of financial meetings that began Friday with discussions among the Group of 20 major economic nations, including wealthy industrial countries and rising economic powers such as China, India, Brazil and South Korea.

In response to the global economic crisis that struck in 2008, the G-20 has been designated the key forum for economic coordination among countries, taking over a role that had been performed for three decades by the Group of Seven richest countries.

In response to the rising clout of such nations as China, the World Bank on Sunday approved a realignment of its voting shares, which boosted China into the No. 3 spot behind the United States and Japan. The change put China ahead of traditional economic powers Germany, France and Britain in a dramatic sign of China's new status as the world's third largest economy. The change also increased the voting power of developing nations from 44 percent of total votes to 47 percent.

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On the Net:

International Monetary Fund: http://www.imf.org/

World Bank: http://www.worldbank.org/

[Associated Press; By HARRY DUNPHY]

AP Economics Writer Martin Crutsinger contributed to this report.

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