ATHENS, Greece April 23, 2010
Protesters chat slogans during a rally in Athens on Thursday, April 22, 2010. About 4,000 protesters marched as civil servants staged a 24-hour strike Thursday against austerity measures and expected job cuts by Greece's crisis-plagued government, while the EU's statistics agency added to the financially stricken country's woes, revising its budget deficit upwards.
(Thanassis Stavrakis/AP Photo)Hobbled by exorbitant borrowing costs, Greece triggered an emergency aid plan Friday to draw cash from the International Monetary Fund and countries that use the euro — the first test of whether the EU is prepared to bail out one of its members.
The package has enough money to keep Greece from defaulting on its massive debts anytime soon. But Athens still faces years of painful cutbacks and questions about its long-term finances, raising worries that its troubles will affect other indebted members of the European Union and further harm the euro currency.
The three-year plan adopted in Brussels recently and hailed as a sign that Europe can cope with the crisis will provide Greece with loans: Euro-zone members will contribute $40 billion (euro30 billion) at interest rates of about 5 percent, while the IMF will chip in about $13.4 billion (euro10 billion) this year. Exact figures for the following years have not yet been made public.
Greek Bailout Request Shores up Europe's StocksGreek Debt Crisis Worsens as EU Revises FiguresGlobal Financial Leaders Cheered by Recovery SignsEuropean governments made the financial assistance available to fend off a Greek default, which would deal a serious blow to the euro currency, shake market confidence and inflict losses on banks that invested in Greek bonds. It also aims to keep Greece's troubles from spreading to other financially weak euro-zone governments, such as Portugal and Spain.
While the aid would stave off default for now, it raises more questions: Will other governments ask for a bailout, and will assuming the financial burdens of Greece mean shakier finances and higher borrowing costs for other euro-zone countries?
The German public, in particular, has been critical of extending assistance to Greece, as Germany recently emerged from years of stagnant growth that saw painful cuts to people's own pensions and social security benefits. Germany will be the biggest contributor of loans.
Greece is under no illusions that the plan will resolve all the problems of a country that has a debt of $400 billion (euro300 billion) and other serious fiscal issues. The nation needs to borrow about $72 billion (euro54 billion) this year alone. It's already covered about half that amount with bond and treasury bill issues, but has $11.3 billion (euro8.5 billion) worth of 10-year bonds
The Associated Press, By ELENA BECATOROS