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Financial assistance for Greece is inevitable, according to economic analysts

15 April 2010 / 12:04:43  GRReporter
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Joy was short of the Greek economic analysts who rushed to assess the adoption of the rescue mechanism for Greece as solution to the credit problems of the country. After a slight decrease, the interest on ten-year Greek government bond jumped again to almost 400 basis points in middle of the week. Financial experts of Commerzbank commented that now the country may not need bilateral support by Member States of the Eurozone and the International Monetary Fund, but this does not solve the problem of lending in the long-term. Finance Minister George Papakonstantinou makes official statements every day that Greece has no intention to trigger the support mechanism. International economic analysts argue that financial aid to Greece is inevitable and in the next ten days the country will formally ask the ancillary credit.  
 
"I do not think that the Greek government will wait to fail in the international markets," analyst Chris Pryce of Fitch and evaluation agency says and adds: "they will turn earlier to the European Commission. It may be after a week or two, but I do not think thay will leave the situation like this for a long time." He explaines that Fitch will likely reduce the country's credit rating by one more level at the end of April due to difficulties with credit from international markets. The assessment will decrease to the level of junk BBB-, if the government fails to protect the execution of the Program for stability and development. Chris Price does not preclude Greece to handle the reduction of government deficit, but emphasizes the difficulty of this task. "The decline in GDP will be between 2% and 3% for this year, and we expect stabilization in a year or two at the soonest. Compared with the experience of other countries, the recession here is quite soft, "he explained.  
 
Meanwhile, Greek Economic experts urge the government to take immediate measures for the enacting of the ancillary mechanism. In a statement for the Financial Times economic adviser to EFG Eurobank Gikas Hardovelas and President of the Institute for Economic and Industrial Research IOBE Yannis Stornaras stress that the program for support will ensure the implementation of the economic reforms. "Interest rates will not decrease while the government claims that it has no intentions to take advantage of the ancillary mechanism. It would be a big mistake, if now we do not use this opportunity, "says Stournaras. "We believe that it is a matter of a week or even to days formally seek help from Europe and the IMF. The financial problems of the country do not leave too big of a chance to delay the inevitable,” says Gikas Hardouvelas.  
 
While the decision to enact the financial aid to Greece is postponed, the Euro-skeptics have one more trump card in their hand. Professor Joham Starmbati is one of the proponents of the idea that the economic crisis in Greece is only the beginning of the end of the common European currency. He believes that the package for bilateral financial support for the Mediterranean country contradicts to the Treaty of Maastricht. He openly states to the Germany newspaper Rheinische Post, that he will file an appeal to the Constitutional Court if Germany had to participate in the program. The publication stresses that the professor reads the financial mechanism as a kind of subsidy (prohibited in international agreement), because the fact that the interest rate of the loan is lower than that one set in international markets. Finance Minister of Germany Wolfgang Shoybe argues on the other hand that Germany should not be included in the program for financial assistance if action is not approved by parliament.  
 
According to a senior official of the Greek Ministry of Finance, member countries of the eurozone can participate voluntarily in the plan for financial support. The same source claimed that Greece has enough allies among the countries within the Eurozone, even if Germany refuses to participate.

Tags: Greece economy crisis IMF
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