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Friday 18th of June 2010
April 16, 2010    

Greece may activate emergency loans

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by Kay Murchie
Greece may activate emergency loans

The euro has lost ground again today after it emerged that Greece has requested talks with the European Union, European Central Bank and the International Monetary Fund (IMF) to discuss its rescue package.

On Sunday, finance ministers of the euro zone nations agreed to provide emergency loans to Greece.

The deal will see €30 billion (£26 billion) in emergency loans and comes at a time when Greece is battling with debt of €300 billion (£273 billion).

The country is currently taking action to reduce its public deficit from 12% to 8% of GDP this year.

The IMF’s managing director, Dominique Strauss-Kahn, said he is sending a team to Athens on Monday to commence talks.

Mr Strauss-Kahn said: “I have agreed to send an IMF team to Athens to begin discussions with the Greek authorities … on policies that could provide the basis for Fund financial assistance under a multi-year program, in the case that the authorities decide to ask for such assistance.

“The Greek decision to initiate Fund program engagement is consistent with the agreement among European leaders last weekend that financial support from members of the euro area should go hand-in-hand with IMF engagement and financial assistance,” he added.

Greece has previously said that the rescue package is intended as a back-up plan and hopes it will not have to activate the loans.

However, after it emerged that Greece had requested to discuss the loan plan, the common currency fell to $1.3546, after falling by 1 cent on Thursday.

Earlier this week, Greece successfully raised €1.56 billion in an over-subscribed bond issue of bonds, designed to raise money to repay some of its debt.

The country needs to raise about €11 billion by the end of next month to refinance maturing debt and interest charges. Its overall borrowing need for 2010 is €53 billion.

According to many analysts, Greece is left with little choice but to ask for help as it will not be able to raise enough money, at an affordable rate, to repay its debts.

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