Sunday, May 02, 2010
First mover advantage to Greece, and a terrible precedent for the Euro area as a whole. The upcoming German elections will be interesting to say the least. Which little PIIGY is next?
ATHENS—Greece reached a historic deal with other euro-zone countries and the International Monetary Fund for a huge bailout, as the country's prime minister on Sunday exhorted his nation to bear the harsh sacrifices needed to mend broken public finances and vowed that his government won't "allow the country to become bankrupt."
"We have no other choices and no time, so accessing the bailout is inevitable," Prime Minister George Papandreou said in a televised speech at an extraordinary cabinet meeting.
The deal comes as Greece detailed even worse projections for its battered public finances. The country now expects it will take until 2014 to get its government deficit under the European Union's limit of 3% of gross domestic product. It had previously said that could be done by 2012. The deficit was 13.6% of GDP last year.
The EU has prepared a package of direct loans from euro-zone countries—the largest share will come from Germany—and the IMF will also lend under its programs for rescuing troubled countries. The deal is expected to total more than €100 billion ($133.14 billion) over three years, though only the EU has set out its figure—€30 billion, for the first year.
Euro-zone finance ministers are meeting in Brussels Sunday to discuss the aid package and are expected to announce new details. The aid deal has been a political struggle in Europe. A bailout is distinctly against the spirit of the euro zone, which was designed to be a common currency union with purely national fiscal management. The bloc set rules to enforce spending discipline but was unable to make them stick.