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$145b rescue is OK’d for Greece

By Raf Casert and Elena Becatoros
Associated Press / May 3, 2010

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BRUSSELS — European governments and the International Monetary Fund yesterday committed to pull Greece back from the brink of default, agreeing on $145 billion in emergency loans on the condition Athens makes painful budget cuts and tax increases.

The rescue is aimed at keeping Greece from defaulting on its debts and preventing its financial crisis from infecting other indebted countries.

After chiding Athens for years of mismanagement and cheating on budget reporting, the IMF and Greece’s 15 partners that share the euro currency rewarded Prime Minister George Papandreou for tough measures that include cuts in civil servants’ pay.

“I have done and will do everything so the country does not go bankrupt,’’ Papandreou told a nation which now faces years of painful belt-tightening after years of overspending.

France, Greece’s most sympathetic partner, agreed there was no other choice. “It’s a very harsh plan because there was a lot of laxity,’’ Finance Minister Christine Lagarde said.

Even Germany, long the fiercest critic of Greece’s boundless spending, saw the need to back a euro partner in such dire need — if only to keep the shared currency out of more trouble. The crisis is already threatening other eurozone countries with huge financial problems, including Portugal and Spain.

“It is not an easy decision but there is no alternative,’’ German Finance Minister Wolfgang Schaeuble said.

The plan will still need approval by some countries’ parliaments. But the eurogroup head, Luxembourg’s Jean-Claude Juncker, said Greece will get the first funds by May 19.

Next Friday, the government leaders of the eurozone will convene in Brussels for an extraordinary summit to wrap up the rescue package and look at ways to avoid it in the future.

The new Greek measures include cuts in civil servants’ salaries and pensions, and tax increases, including for tobacco and alcohol, that aim to cut the deficit to below 3 percent of gross domestic product by 2014 from 13.6 percent now.

“We are called on today to make a basic choice. The choice is between collapse or salvation,’’ Finance Minister George Papaconstantinou said.

Violent protests already marked the Labor Day parades in Athens on Saturday and more demonstrations and a nationwide general strike are set for Wednesday. “These are the harshest, most unfair measures ever enacted. That is why our reaction will be decisive and dynamic. You can’t always make the workers pay for the results of failed policies,’’ said Stathis Anestis, spokesman for Greece’s largest umbrella union, GSEE.

Yet with Papandreou’s Socialists holding a large majority, his austerity plan is unlikely to face obstacles before it is rushed through Parliament by Friday.

The IMF’s lead negotiator in Athens, Poul Thomsen, praised Greece’s “draconian reforms,’’ which he said could help “shock and awe markets and reestablish confidence.’’