Global Biz
Greece presses "help" button, markets still wary
(Agencies)
Updated: 2010-04-24 02:37
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 A Greek flag flies in the wind at a park in central Athens April 23, 2010. [Agencies]
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ATHENS – Debt-stricken Greece appealed to its European partners and the IMF for emergency loans on Friday, yielding to overwhelming market pressure to set in motion the first financial rescue of a member of the euro zone.
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"It is a national and imperative need to officially ask our partners in the EU for the activation of the support mechanism we jointly created," Papandreou said in a statement broadcast live from the remote, tiny Aegean island of Kastellorizo.
"The time that was not granted to us by the markets will be given to us by the support of the euro zone."
European markets rallied briefly on the announcement but fell back as investors said the long-awaited bailout, which could be the largest multilateral rescue of a country ever tried, would bring only short-term relief.
There were concerns that the bailout could force harsher austerity on Greece, deepening its recession, and that it would set a precedent for other euro zone underperformers.
After an initial bounce, the euro was only slightly higher on the day at $1.3360 at 12 p.m. EDT (1600 GMT).
The Greek crisis has hit confidence in the single currency, shared by 16 of the 27 EU member states, sparking fears it could spread to fellow weaklings Portugal and Spain, and fuelling skepticism in some quarters about the euro's long-term survival.
"On the one hand it could be perceived a relief that Greece is taking the financial help but it does not address the systemic risk and begs the question as to whether countries like Spain may look for the same rescue package in the near future," said Simon Brown, CEO of financial analysts Prospreads in London, forecasting further euro weakness.
The premium investors demand to buy Greek 10-year government bonds rather than euro zone benchmark Bunds tightened to 525 basis points, versus 611 on Thursday, before rebounding back to 570.
Torn between punishing global market forces and Greek workers protesting at painful austerity measures, Papandreou's socialist government hesitated over pressing the "help" button, tempting investors to bet against its debt.
The last straw came on Thursday when the European Commission revealed that Greece's 2009 public deficit was even higher than feared at 13.6 percent of gross domestic product, raising the bar for this year's drastic cut. That drove Greek bond yields to 12-year highs, making borrowing prohibitive.
The decision to invoke the aid mechanism followed a marathon seven-hour cabinet meeting, at which some ministers voiced fears of still tougher austerity conditions, Greek media reported.
"This certainly does not mark the end of the crisis, there's still much further to go," said Ben May, European economist at Capital Economics. "They've still got the medium-term problems of getting their public finances in order, and obviously the issue of competitiveness."
