RPT-WRAPUP 5-Greece expects aid in time to avert default

* Greek finance minister: Aid will come in May

* Canada’s finance minister sees increase in package

* IMF says talks speeding up, sees deal in time to help

* Germany says new steps “absolute prerequisite” for aid
(Repeats item, recasts headline)

By James Mackenzie and Kristina Cooke

WASHINGTON, April 25 (BestGrowthStock) – Greece’s finance minister
said on Sunday that aid will arrive in time to avert the euro
zone’s first sovereign debt default as signs grew that a 45
billion-euro ($60.49 billion) rescue would have to be bigger.

Finance Minister George Papaconstantinou said bailout talks
with the International Monetary Fund and European partners went
well and he was confident Greece would secure help in May to
finance its crippling public debt.

Papaconstantinou also sent a warning to investors who have
been betting that Greece will default: “All I can say is that
they will lose their shirts.”

Saddled with huge debt and a swollen deficit, Greece bowed
to intense pressure from financial markets on Friday and
formally requested aid, triggering what would be the first
bailout of a member of the 11-year-old single currency bloc.
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Athens has already announced billions of euros in budget
cuts, including tax hikes and reductions in public sector
wages, setting off violent protests and strikes.

Now it is in talks with the European Union and IMF on
additional steps to get the aid flowing in time to meet a May
19 debt deadline.

Papaconstantinou played down concerns that Germany, facing
a key regional election in early May, might block a rescue deal
that is hugely unpopular in Europe’s biggest economy.

Even if there are delays in getting parliamentary approval
in some European countries, IMF support could be matched with
bridge loans from European countries that had already cleared
the deal, the minister told a news conference at the IMF.

IMF Managing Director Dominique Strauss-Kahn said the Greek
aid talks had accelerated and he expressed confidence in
Greece’s determination to get its economy back on track.


Canada’s Finance Minister Jim Flaherty said the package
would end up being “more than had been said previously,”
declining to specify the amounts being discussed.

Asked by a reporter whether aid could be as much as 80 or
90 billion euros, Papaconstantinou said he could not provide
specific figures.

French Economy Minister Christine Lagarde pointed out that
the 30 billion-euro commitment from euro zone countries was
just for the first year of a three-year package and talks were
going on about what would come after that.

IMF and European funding would be disbursed simultaneously,
Papaconstantinou said, addressing speculation that the IMF
might lend Greece money quickly if Europe drags its feet.

The IMF is expected to provide one-third of the aid.
Investors would take little comfort from the inconclusive
rescue talks over the weekend, analysts said.

“The issue of Greece’s debt crisis is not over and there
are other sovereign debt crisises on the horizon,” said Peter
Kenny, managing director at Knight Equity Markets.

“It will not derail the (U.S.) market but it will likely be
a wet blanket until we get further clarification.”

Douglas Lee, an analyst with Economics from Washington,
said officials could not afford to allow a default.

“If Greece is forced to default, bank credit markets in
Europe will freeze and push these economies back into
recession,” he said.

“Repercussions in the U.S. would be very serious. While
this worst-case scenario is highly unlikely, lasting effects on
confidence in sovereign debt will be reflected in upward
pressure on interest rates.”


Mindful of opposition to bailing out Greece, German Finance
Minister Wolfgang Schaeuble warned Athens that an overhaul of
its economy was “unavoidable and an absolute prerequisite” if
Berlin and the EU were to approve the aid.

Papaconstantinou responded saying Greece was already taking
tough measures and the rescue would include strict conditions.
He said Berlin was “completely on board” with the conditions
set for Greece and noted that Germany had backed the euro
zone’s decision to make support available to Greece.

France’s Lagarde promised to hold Greece accountable for
“unsuitable economic policies” that pushed its 2009 budget
deficit to 13.6 percent of gross domestic product and its debt
to 115 percent of output.

She described the aid package as a “cocktail of indulgence
and great strictness,” telling the Journal du Dimanche weekly
that Greece’s partners would closely monitor progress and put
their “foot on the brake” if Athens reneged on commitments.

Germany and France, the biggest economies in the 16-nation
euro zone, are due to provide about half of the EU aid.


Fears over the chances of a debt default have pushed the
yield on Greek 10-year bonds above 8.7 percent, a whopping 567
basis points over the rates on benchmark German Bunds.

This has made it prohibitively expensive for Athens to
service its mountain of debt and Greece’s formal request for
aid on Friday did little to ease market pressures.

One big risk to Greece’s economic plans is public
opposition to further austerity steps. Greek riot police fired
teargas at protesters who held an impromptu march through
central Athens on Friday to protest against more budget cuts.

A poll released on Saturday showed that roughly two-thirds
of Greeks believe Prime Minister George Papandreou’s socialist
government was either too slow to react or handled the economy
poorly as the country’s fiscal crisis deepened.

Centre-left newspaper Eleftherotypia said the “spectre of
Hungary” was haunting Papandreou’s government. Voters in
Hungary booted out the socialist government this month after it
tried to push through painful IMF-ordered budget cuts.
($1=.7439 Euro)
(Additional reporting by Noah Barkin in Berlin, Sophie Hardach
in Paris, George Georgiopolous in Athens, Tracy Rucinski in
Madrid, and the Reuters IMF team in Washington; Writing by
Emily Kaiser and Noah Barkin; Editing by Ralph Boulton and
Patrick Graham)

RPT-WRAPUP 5-Greece expects aid in time to avert default