Greek officials confident of loans

April 26, 2010 at 12:00a.m.

Associated Press

WASHINGTON

A key Greek economic official expressed confidence Sunday that his country will be able to secure billions of dollars in emergency loans from European countries and the International Monetary Fund to avoid a crippling debt default.

Greek Finance Minister George Papaconstantinou also had a blunt message for market speculators betting against Greece: “They will lose their shirts.”

Papaconstantinou called a “red herring” market speculation that Greece may still have to default on some of its debt, forcing investors to accept less than full repayment on the Greek bonds they are holding. He said any such restructuring of Greek debt was “off the table.”

His comments capped a difficult week in which Greece was forced to formally request assistance on Friday from other European nations and the International Monetary Fund after months of saying it would be able to weather its debt crisis using its own resources.

In a nationally televised address announcing the decision to request aid, Greek Prime Minister George Papandreo described his country’s economy as a “sinking ship” with soaring government budget deficits that Greece could no longer finance without outside help.

To tide it over, Greece is hoping to obtain emergency loans of about $40 billion from the group of 16 European countries which, like Greece, use the euro as a common currency, and an additional $13.4 billion from the IMF.

The Greek government has already agreed to put in place painful austerity measures to trim government spending and public pensions, but it was likely that the IMF and the euro-zone governments will require even tougher measures in returns for assistance.

German Finance Minister Wolfgang Schaeuble told the weekly Bild am Sonntag in an interview published Sunday that Germany has not yet decided whether to support Greece’s loan request, indicating Europe’s largest economy may demand further austerity measures before agreeing to the loans.

Asked about those comments, Papaconstantinou said in his Washington news conference that he had no doubt that at the end of the negotiations, Greece will win the loans it needs from both the European countries and the IMF.

“We are all confident that this will be done in time and we will continue to be able to finance Greek public debt without absolutely any problem,” Papaconstaninou told reporters.

The IMF’s managing director, Dominique Strauss-Kahn, expressed similar optimism, saying the IMF and European government recognized the “need for speed” because of Greece’s escalating problems and the adverse impact they were having on financial markets around the world.

“We are all aware of the seriousness of the situation and the courageous efforts being made by the Greek people,” Strauss-Kahn said in a statement.

Papaconstantinou told reporters that he expected the IMF board would approve its portion of the loan support within the first 10 days of May and that approval would be in time to meet a large payment of $11.3 billion on Greek bonds coming due on May 19.

He said that he expected the support from the IMF and the European governments to be provided at the same time but he said if some European parliaments were delayed in approving their contributions, the IMF support could be used to obtain bridge financing from other sources.

Greece’s debt crisis weighed heavily on financial leaders as they wrapped up a series of financial meetings that began Friday with discussions among the Group of 20 major economic nations, including wealthy industrial countries and rising economic powers such as China, India, Brazil and South Korea.

In response to the global economic crisis that struck in 2008, the G-20 has been designated the key forum for economic coordination among countries, taking over a role that had been performed for three decades by the Group of Seven richest countries.