Greece put itself and the EU in uncharted waters this week by becoming the first eurozone country to ask for a loan lifeline involving the IMF as its economy risked running aground.

Athens on Friday called on the EU and the IMF to activate a rescue plan worth €45-billion ($60-billion) to keep its head above water as the Greek prime minister described the country as a “ship about to sink”.

“All of us … inherited a ship that is about to sink,” Premier George Papandreou told Greeks on Friday from the tiny Aegean island of Kastellorizo as he lambasted his conservative predecessors for their handling of the economy.

“We are on a difficult course, a new Odyssey for Hellenism,” he said, referring to the Greek hero’s great voyage home from the Trojan War of antiquity.

The government said its hand was forced after the European Commission on Friday issued a sharp revision on its 2009 public deficit, followed by a new downgrade on its debt by ratings agency Moody’s, the latest in recent weeks.

“As the Greek saying goes, five in the hand is preferable to the hope of ten,” said political analyst George Sefertzis.

“The IMF has been linked to anti-social policies [in return for aid] but ensuring that the country does not go bankrupt is a much better overall defense of the poorer classes,” he said.

As the Greek finance minister headed to Washington for a scheduled International Monetary Fund meeting and his staff brokered the emergency loan terms with a mission of EU, ECB and IMF officials in Athens, Greeks wondered where their future lay.

Quality of life

“This will change basic facts about our quality of life,” said Vassilis Korkidis, head of the Greek traders confederation.

“Nobody can say what the final outcome of this choice will be,” he added.

The government on Friday admitted that its efforts to win over sceptical markets with tough crisis policies had failed and that those very efforts risked being nullified by the additional cost of Greece’s steeply rising loan rates.

The country has overall public debt of about €300-billion ($400-billion) and the return it must pay to secure new loans has skyrocketed in recent weeks as investors feared Greece may be heading for a default.

The rate on Greek 10-year bonds — a benchmark instrument — has risen from about 5% last year to over 8% this week.

“Today, the market situation threatens to undermine not only the sacrifices of the Greek people but also the normal progress of the economy,” Papandreou said.

But after being hit with a barrage of spending cuts and tax hikes worth around €16-billion this year, many Greeks — and especially labour unions — are saying enough is enough.

Repercussions

“The question is who will decide on policies and how?” Korkidis said.

“Are we giving up central functions and responsibilities to a group a technocrats, and what repercussions will these decisions have on the social state?” he said.

So far the bulk of cuts have hit the Greek civil service, a haven of fiscal waste that successive governments had not dared to touch.

A source of envy and resentment for many Greeks — particularly those not employed in it — it was padded for decades with political appointees and became a byword for sloth.

But while Greeks concede the end of the civil service bonanza was long overdue, there are fears that the EU and IMF will demand further austerity measures such as broader wage cuts that will plunge the country into a recession even deeper than the one it currently faces.

The economy is expected to shrink by two percent this year according to the Bank of Greece.

But there are those who see no other way out given Greece’s troubles.

“Personally I don’t have a problem with the IMF,” said Dionysis, a 50-year-old cafeteria owner.

“I mean, who else is going to lend us money anyway? Have you seen today’s spreads?” he asks, pointing to a TV screen on his counter.

“It just may be what Greece needs to clean up its act and maybe get rid of a couple of hundred thousand civil servants,” he said.

Ending Saturday’s meeting of the IMF’s 186 members, managing director Dominique Strauss-Kahn addressed the Greek public’s opposition to the bail-out.

“Greek citizens shouldn’t fear the IMF. We are there to try to help them,” he said.

Strauss-Kahn had earlier promised that the Fund will “move expeditiously” in response to Greece’s appeal for help. – AFP