Greece's financial crisis worsened Wednesday after their country's credit rating was downgraded to junk status, as investors worried political pressures could block a multi-billion euro bailout, DPA reported.
Financial markets across the world took a hit Tuesday after ratings agency Standard & Poor's downgraded Portuguese and Greek credit ratings, fuelling fears that the crisis could spread to other European states.
"Europe must act here and now," ran the banner headline Wednesday of top-selling newspaper Ta Nea.
Conservative daily Kathimerini ran the headline "It is now a race against time - fear is spreading in all of southern Europe," while daily newspaper Ethnos' front page screamed "Europe wakes up. Now we are all running."
The downgrade comes as Europe attempts to finalize the joint EU- International Monetary Fund 45-billion-euro emergency line of credit for Greece, which has 8.5 billion euros (11.3 billion dollars) of debt due on May 19.
Even before news of the downgrade was announced, uncertainty over Greece's ability to deal with its public debt burden meant the country's bonds had already fallen further in Tuesday trading. Stocks in Athens had slumped by 6.7 per cent at close of the stock markets.
Bonds from other troubled eurozone states also battling to knock their finances into shape - Portugal, Spain, Italy and Ireland - had also already taken a hit in markets earlier in the day.
The further in value a nation's bond falls, the more interest it has to offer to entice investors to buy the bonds, in effect loaning money to the country.
"This is clearly a European situation now - that the problem is broader and concerns all countries and not just Greece," said Greek government spokesman Giorgos Petalotis.
"We are doing everything necessary to overcome this difficult situation - we are taking the measures and decisions that have been asked of us."
The downgrade took place just as hundreds of public sector workers from the country's largest union took to the streets in central Athens to protest the government's austerity measures.
Saddled with huge debt and a swollen deficit, Athens bowed to intense pressure from financial markets last week to formally request activation of a 45-billion-euro (60-billion-dollar) EU-IMF aid plan, triggering what would be the first bailout of a eurozone member.
Greece should learn in early May whether the European Union's executive will approve its request for a bailout. The news is scheduled to come just as Greece finalizes a new round of budget cuts, sources in Brussels said Tuesday.
The European Commission, the European Central Bank and the IMF are currently considering whether to approve the request.
It would then fall to eurozone states to make a final decision.
European officials, along with the IMF and the Greek government, have stressed the need for speed in paying out loan guarantees provided under the rescue plan. Greece has debts totalling 300 billion euros.
A large majority of Greeks, 60.9 per cent, disapprove of their government's decision to turn to the EU and IMF for emergency aid, according to an opinion poll released Tuesday.
But another survey published Tuesday showed most Germans also oppose plans to lend Greece billions of euros in financial support.
Indeed, faced with widespread German voter anger over the Greek bailout, German Chancellor Angela Merkel again insisted on Monday that strict conditions would have to be applied to any money handed over to Athens.
At 8.4 billion euros, Germany's contribution to the rescue plan represents the biggest among the 16 eurozone states.
"If Berlin does not pay then Greece is dead," said one radio commentator in Athens.
Meanwhile, Greek media reported that EU and IMF officials, who are currently in talks with the country's finance ministry, had proposed further steps to slash public sector costs and boost competitiveness.
These include increasing the pension age to as high as 67, from a current average of around 62, and scrapping the system of two extra monthly salaries a year as bonuses.
Prime Minister George Papandreou said his country stood "naked before international market storms."
"We are living though Greece's hardest time in recent decades," he told his Socialist parliamentary committee. "The challenges that our country faces are unprecedented, not only for Greece but also for Europe and even the world economy."
...