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April 28, 2010

Greek PM Braces Country for Bailout Deal

Greece's prime minister is trying to prepare his debt-ridden country for a financial rescue that will likely bring more economic hardship.

Prime Minister George Papandreou met with union leaders and his ruling socialist party Thursday, promising he would do "whatever it takes to save the country."

The European Commission's top economic official, Ollie Rehn, said Thursday that a final agreement on a multi-year emergency aid package is just days away.  Officials say the bailout will likely cost about $160 billion, and will require Greece to take further actions to drastically slash the country's deficit by 2011.

Greek union officials said the proposed deal could cause extreme hardship.  One union official compared the terms to blackmail.

Politicians and investors are worried that economic problems could spread if Greece fails to pay back its debt.  Those concerns grew earlier this week, when a key credit rating agency, Standard and Poor's, downgraded its credit ratings of Greece, Portugal and Spain.

Any Greek bailout will require the approval of other euro zone members, and the plan has met political opposition in Germany.

European officials, including the European Commission's Ollie Rehn, have been pressing Germany to support the rescue, saying the package is needed to "safeguard financial stability in Europe."

European Central Bank President Jean-Claude Trichet also said the bailout was needed to help give Europe a "strong sense of direction" to guide the economy.

Standard and Poor's Chief Economist David Wyss told the Associated Press Thursday that the biggest threat from the Greek debt crisis is panic among investors.

Wyss said if people fear Greece will default, they will also worry Portugal will default and then "they will panic about everything."

Some information for this report was provided by AFP and Reuters.