Greece started talks with European Union and International Monetary Fund (IMF) officials today to hammer out details of an economic plan that could offer the euro zone member €40-€45 billion to exit a debt crisis.
With borrowing costs at a 12-year high and its economy shrinking for a second straight year, Greece is struggling to slash its budget gap with painful austerity measures to convince markets it will not default on its debt.
But prime minister George Papandreou's socialist government faces perils from both home and abroad, as investors drive up bond yields, pushing Athens towards the bailout, while Greek workers oppose further austerity measures.
Finance minister George Papaconstantinou started meetings this morning with a mission of mid-level advisers from the European Commission, the European Central bank and the IMF.
ECB officials were among the last to arrive in Athens for the talks, which could last for weeks, after aircraft delays due to the Icelandic volcano.
The Mediterranean country has yet to ask for activation of the package, which at €30 billion from euro zone states and €10-€15 billion from the IMF in the first year, would be the largest such bailout ever attempted if Greece asked for this.
"The critical hour for the decisions that will determine the future of the country is at hand," financial daily Imerisia wrote in a column.
"There is not a lot of room for manoeuvre and, as a result, the path to the aid mechanism seems to be a one-way street."
The prospect of outside help has raised anxiety among Greeks already stinging from public wage cuts, a pension freeze and tax hikes the government imposed last month to cut this year's budget gap by a third to 8.7 per cent of gross domestic product.
About half a million Greek civil servants are planning to strike tomorrow in their fourth action this year.
Opinion polls show nearly three-quarters of Greeks believe the aid deal, if tapped, would lead to a further deterioration of their living standards. However, most Greeks still support the socialist government elected in October.
Doubts persist over how long the deal could take to win parliamentary approval in some euro zone states and if it could be hampered by a May 9th election in Germany, where voters oppose helping a country that has flouted EU budget rules for years.
Economists have also questioned Greece's long-term solvency, and investors are focused on Athens' efforts to raise the €10 billion it needs to roll over debt, make bond interest payments, and finance its deficit in May.
"There is no chance that Greece will be left high and dry in May," Mr Papaconstantinou said yesterday.
"Greece will borrow either from the markets or from its partners." IMF officials have said the mission should last 15 days and any agreement would be finalised shortly afterward by its board.
But economists and Greek media say it could happen even sooner, and Mr Papaconstantinou could possibly make the request as soon as this weekend, when he will attend the IMF's annual meeting in Washington.
That would potentially give enough space to funnel funds to Athens in time for it to pay back an €8.5 billion bond coming due on May 19th.
The worries have shaken the euro currency and pummelled Greek assets, with the premium investors demand to buy Greek bonds over German benchmarks hitting a 12-year high of 492 basis points yesterday.
Reuters