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Investors: Greece should ask for support form the IMF as soon as possible

09 April 2010 / 14:04:26  GRReporter
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Greece will officially ask for help from the International Monetary Fund at the end of this week. This shocking forecast was made by the Swiss bank UBS with the provision that the Greek government has to act and the Greek society has to drink the bitter glass. According to the economists of UBS the country has to urgently turn to the Fund as it becomes more and more clear that it cannot support economically the measures for rehabilitation of the public finances. The same opinion shares also the famous economist William White who states that it is one thing to talk about serious reforms and it is a completely different thing to actually put them in practice. “The Greek government has to show political will and to convince its citizens that the painful reforms are the only cure for the rehabilitation of the economy”, he underlines.

The assessment that Greece will not be able to manage without the interference of the IMF is also making the American investment bank Goldman Sachs. In a letter of the chief economist of the bank in Europe Erick Nilsen to the big clients of the financial institution he officially states that it is a matter of days to put into motion the mechanism for bilateral support from the Euro zone and the Fund for the Greek economy in trouble. The economist expresses the concerns of the investment community that the Greek government will not be have the courage to accept the clauses of the IMF for providing financial support for the amount of the subsidy which could be expected from the euro zone as well as whether this subsidy will be enough for the Greek economy. According to Erick Nilsen at the end of the day Greece will not be able to avoid the International Monetary Fund and will receive a loan for the amount of 20 to 25 billion euro. The Fund will offer an interest rate of 3%, while the European countries will ask for an interest not less than 4 – 5%. The representative of Goldman Sachs however is explicit that even if it accepts this loan, the situation which Greece is facing is not at all pink as it will not be enough to cover its debts for the next 18 months.

According to the same expert it is positive the fact that currently in Athens there is a mission of the IMF and it is very probable for the representatives of the Fund to have already started discussion with the economic team of the government about the conditions under which the loan will be granted to Greece. In his letter Erick Nilsen appreciates the fact that the IMF will insist on the increase of the competitiveness of the Greek products by the decrease of their value. Because of this he expects the Fund to ask also a decrease of the salaries of the people employed in the private sector of 15% to 20% and also the liberation of the labor market. Nilsen predicts additional measures for the decrease of the budget deficit, which will lead to the increase of the unemployment. The chief economist of Goldman Sacks for Europe also discusses the condition of the Greek banking system by questioning the efficiency of the unfreezing of the government subsidy of 15 billion euro taking into consideration the financial problems of the public sector.

Similar opinions of the necessity of the country for external support also shared experts from the banks Fortis and Nomura. The chief economist of the credit rating agency Fitch Chris Price warns that the time has come for Greece to ask for financing from the Euro zone and the IMF and that the sooner it does that, the better it will be. The analyzer from the other big agency Standrad & Poor’s Marco Mirsnik warns that Greece is endangered of a new decrease of the credit rating if it continues to owe high interest for the financing of the foreign debt and if the government diverges from the goals stated in the Program for stability. The agency gave a rating of BBB+ for Greece in March, however it warned that there is still a risk of decrease in the next 18-2 months.

Tags: Greek economic crisis International Monetary Fund Markets
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