BUSINESS STRATEGY – Greece’s prime minister warned his European Union partners on Thursday that he would not be able to make planned deficit cuts unless the country can borrow money more cheaply — and said he would prefer not to have to turn to the International Monetary Fund for help.
Speaking before a committee at the European Parliament, Prime Minister George Papandreou said that austerity measures announced by the Greek government showed it was committed to the stability of the euro and that it would carry out necessary structural reforms.
“But if we keep borrowing at very high rates, and this is the challenge we have, we cannot sustain the deficit reduction that these hard measures aim to achieve,” he said. “We should be able to borrow at rates that are normal.”
Later, he told reporters that fellow E.U. leaders should make a clear offer of support at a summit in Brussels next week. “This is, I think, an opportunity we should not miss,” he said.
Stocks in Europe were off slightly in early trading Thursday and the euro fell against the dollar.
The Greek government needs to borrow €53 billion, or $72 billion, in financial markets this year and must refinance around €20 billion of debt in April and May — all at interest rates that some economists say are unsustainable.
Greece, which acknowledged last year that it had cheated with economic statistics to hide the depth of its deficit problems, routinely has to offer investors a premium of at least three percentage points more than Germany, which is considered the benchmark in Europe.
On Thursday the price investors demand to hold Greek debt instead of German bonds widened to 3.1 percentage points.
Mr. Papandreou said countries that run into trouble need a mechanism to help them. He said Greece had not sought financial aid but would prefer any help that is required to come from Europe rather than the I.M.F.
Mr. Papandreou said Greece was already implementing I.M.F. style structural reforms without having access to I.M.F. funds, .
“We have talked to the IMF, they would have asked us for nothing more,” he said. “But I would prefer the European solution. I would prefer the European solution as part of the euro zone, as a European.”
Greece is not “asking for money” now, he said, but wanted “to have it on the table, some form of an estimate on the table. That alone, I believe, would be enough to make sure that the spreads, the speculators would be warned off.” Read more »