Imminent agreement on an aid plan for Greece

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ATHENS (Reuters) - The Greek government expects talks with the European Union and the IMF on a financial aid package to be completed on Saturday, a government official said, as thousands of people demonstrated in Athens against planned austerity measures.

In Paris, the French Minister of the Economy, Christine Lagarde, indicated for her part that she expected aid of 100 to 120 billion euros for Greece and was hopeful of arriving by the end of the weekend. end to an agreement on the activation of this plan.

The Greek debt crisis has shaken the markets and brought to light divisions between members of the euro zone.

Athens is negotiating with the International Monetary Fund, the European Commission and the European Central Bank, but any agreement must be submitted to the Greek government and EU governments.

“We expect to conclude today (Saturday) the negotiations with the IMF, the EU and the ECB,” a member of the Greek government told Reuters. "The Prime Minister (George Papandreou) will chair a Council of Ministers tomorrow morning at 10:10 a.m./30:XNUMX a.m.."

Christine Lagarde spoke after a meeting convened at the Elysée by Nicolas Sarkozy to discuss Greece.

The French presidency said that Nicolas Sarkozy had spoken on the phone with German Chancellor Angela Merkel and that the two leaders were determined to "act quickly" to implement a three-year plan.

AUSTERITY MEASURES

But in exchange, Greece will have to accept draconian budgetary savings and thousands of people demonstrated on the occasion of May Day in the streets of Athens, chanting slogans hostile to austerity measures.

The Greek Civil Service Union also called for a four-hour strike on Tuesday, in addition to a general strike scheduled for Wednesday.

Greek Deputy Prime Minister Theodoros Pangalos, however, told Reuters he was optimistic that the measures would be implemented and prevent Greece from defaulting.

Athens intends to reduce its budget deficit by 24 billion euros in exchange for aid of 120 billion euros over three years. Investors hope this will prevent the Greek crisis from sinking other fragile EU economies.

The Greek government is nevertheless confronted with the trade unions, ulcerated by the extent of the austerity measures, and social unrest could spread.

According to an ALCO poll published Friday by the newspaper Proto Thema, 51,3% of Greeks are ready to take to the streets if the government adopts new austerity measures. The course of the euro fell after the publication of this poll, the investors fearing that an opposition of the public opinion succeeds in derailing the austerity plan.

European authorities blamed speculation for aggravating the crisis by betting on a possible Greek default, which pushed up borrowing costs sharply.

Germany announced on Friday that European banks would participate in the plan for Greece, which could help governments convince taxpayers of the need to join.

RISKS OF SPREAD

At the request of the German finance minister, the chairman of the board of directors of Deutsche Bank, Josef Ackerman, is helping to coordinate the efforts made by the German private sector to support the aid plan for Greece, learned Reuters from a banking source.

The consortium has already pledged to contribute between one and two billion euros which could consist of buying some of the debt of the Greek government, but no formal agreement has yet been reached, it is said. from the same source.

In an interview to be published in Bild am Sonntag on Sunday, Chancellor Angela Merkel said she would welcome "voluntary participation by banks".

If eurozone countries fail to put in place an aid plan for Greece capable of calming the markets, they could find themselves faced with a bill of 500 billion euros to save several countries such as Portugal. and Spain, whose sovereign rating was lowered this week by the rating agencies.

However, European Commission President José Barroso, visiting China for the inauguration of the Shanghai World Expo, said the aid package for Greece would prevent the crisis from spreading to other countries. . "It's about safeguarding the overall financial stability of the eurozone," he said.