–EU, IMF Jointly To Provide 30 Bln Euros In Immediate Support To Greece
–International Community To Do ‘Whatever It Takes’ To Help Greece
–Rejects Possibility of Default, Which Wouldn’t Solve Greece’s Problems

By Heather Scott

WASHINGTON (MNI) – The “unprecedented” support for Greece from the
International Monetary Fund and its fellow eurozone members is a strong
signal of the commitment to do anything to help the nation and avoid
spillover to its neighbors and the broader world economy, a senior IMF
official said Sunday, hours before markets were to reopen after last
week’s bloodletting.

The IMF Sunday announced formal approval for a three-year, 30
billion euro standby loan program, which is front-loaded to provide 5.5
billion euros to Greece immediately.

Combined with EU support, Greece will have E20 billion in immediate
financial support as part of a package that will total E110 billion
euros ($145 billion). The program includes E40 billion in financing in
2010, of which E10 billion will come from the IMF.

IMF No. 2 John Lipsky said the size and scope of the aid provides a
“very important signal and a very clear signal that the international
community is willing to do whatever it takes to help Greece to overcome
the severe economic challenges it is facing.”

He said “our collective effort will contribute to the stability of
the euro, it will benefit all of Europe, it will strengthen global
financial stability and help underpin recovery in the global economy.”

Despite the size — representing 3,200% of Greece’s IMF quota —
Lipsky told reporters in a conference call following the unusual Sunday
board meeting that there was unanimous support on the board for the
program.

He said “everybody understood the central point, namely that the
needs are very large … as well as the potentially negative
implications of a disorderly situation in the Greek economy and Greek
finances would have on its neighbors.”

Poul Thomsen, deputy director of the IMF’s European Department and
mission chief for Greece, told reporters he is sure the announcement
will have an “immediate impact” in setting the recent market volatility,
which was created by the lack of clarity on the size and scope of the
financing mechanism.

Lipsky explained: “The external financing provided by the fund and
its European partners will be sufficient to cover Greece’s government
obligations until 2012.

“And that’s going to give the Greek authorities the time it needs
to establish the credibility of the program, to help the Greek economy
regain balance well before it will be required to access market
borrowing again.”

The joint rescue plan will provide Greece with “ample breathing
space,” he said.

Lipsky rejected the possibility of a Greek debt default, saying it
would not solve Greeces problems in any case. He said speculation of a
possible default is based on a faulty understanding of the nation’s
situation.

Even without debt obligations, Greece still would have a 9% primary
deficit which is “not sustainable” and a default would simply exacerbate
the nation’s economic and financial problems, not ease them.

Lipsky said debt restructuring would be a “recipe for significant
disorder, for expanding difficulties, and would not address problems of
fiscal sustainability.”

While EU finance ministers finalized their portion of the Greek
rescue Sunday, and discussed potential support for other nations in
trouble, and reeling from the impact of the crisis — notably Spain and
Portugal — President Barack Obama spoke with German Chancellor Angela
Merkel and French President Nicolas Sarkozy Sunday.

The White House said the calls were “part of his ongoing engagement
with European leaders about the economic situation there. They agreed on
the importance of Europe taking resolute action to build confidence in
the markets.”

Despite the concerns about spillover to other eurozone nations,
Lipsky stressed that “there are no program negotiations occurring at
this time with either Portugal or Spain,” though the IMF will continue
to cooperate with EU members.

Lipsky stressed that the Greek plan is a “very tough adjustment
program” that was designed and approved by the authorities before the
IMF program was approved.

While it “undoubtedly will demand sacrifice from the Greek people”
it is well-balanced between cost cutting and revenue raising, and seeks
to protect the most vulnerable sectors of society while ensuring the
more affluent pay their fair share, he said.

The protests in Greece are understandable since some segments will
be hurt by the necessary steps taken, but Lipsky said there are signs of
broad support for the government’s efforts to restore the prospects for
growth in the economy.

The Greek program calls for an 11% of GDP fiscal adjustment on top
of 5% already implemented this year. Beyond the fiscal steps, it
includes measures to make the economy more efficient and more
competitive to take full advantage of the EU’s single market.

While Lipsky acknowledged the tough times ahead for Greece, he also
said there are upside risks as the steps are implemented to increase the
efficiency of public sector and the productivity of economy.

The IMF provided frequently asked questions on the program at the
following link: http://www.imf.org/external/np/exr/faq/greecefaqs.htm

** Market News International Washington Bureau: 202-371-2121 **

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