Greek Prime Minister: Reforms will fail if aid held up

AFP, Thursday 14 Jul 2011

Greek Prime Minister Georges Papandreou warned Thursday in a press interview that if financial aid from the EU and IMF did not come quickly, economic reforms in the debt-laden country would fail

"The current atmosphere is not helping us to get out of this crisis," Papandreou told the Financial Times Deutschland (FTD).

"This insecurity is scaring investors. If we do not get a decision quickly that defends a second (aid) programme for Greece and allows the country to undertake deep reforms, then the programme itself will fail," he warned.

The European Union and International Monetary Fund created an initial rescue plan for Greece worth 110 billion euros ($156 billion), and are in the process of setting up a second of roughly the same amount.

The EU and IMF had initially expected Greece to be able to return to private equity markets by next year for funding, but now realize that will not be possible.

One idea now circulating would see Greek debt purchased on financial markets at heavy discounts and then cancelled, thus cutting Athens' debt burden.

Such a role could be taken on by the European Financial Stability Fund (EFSF), and its biggest creditor, Germany, appears to be coming around to that idea.

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