Greece Asks for Activation of Rescue Package

“It is a matter of national need to ask officially” for the activation of the EU-led aid mechanism, George Papandreou said in a televised address from the Greek island of Kastelorizo. Photo by EPA/BGNES

Greece's prime minister has asked for the activation of a joint eurozone-International Monetary Fund financial rescue plan on Friday.

“It is a matter of national need to ask officially” for the activation of the EU-led aid mechanism, George Papandreou said in a televised address from the Greek island of Kastelorizo.

The rescue package will provide Greece with loans from other eurozone countries to the tune of EUR 30 B at interest rates of about 5%, and about EUR 10 B from the IMF.

The news comes a day after it was confirmed that the Greek government ran up a budget deficit of EUR 32.34 B in 2009, representing 13.6% of gross domestic product (GDP) far worse than expected.

Moody's Investors Service has lowered Greece's sovereign ratings to A3 from A2 and placed them on review for further possible downgrade.

With national debt of almost EUR 300 B and bond yields exceeding junk-rated nations such as the Philippines, Greece faces a fiscal mess that threatened to spread to Spain and Portugal, forcing the EU to set up a standby aid facility, the Bloomberg agency commented.

At stake is the future of the euro 11 years after its creators gave the European Central Bank responsibility for interest rates while leaving fiscal policy in national capitals.

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