Europe defends massive Greek bailout

BERLIN, May 3 (UPI) -- European leaders Monday defended an unprecedented $145 billion loan package for Greece, arguing the money was needed to stabilize the euro and protect the European economy.

"We are not only helping Greece but we stabilize the euro and thus help people in Germany," German Chancellor Angela Merkel said Monday in Berlin, shortly after her Cabinet green-lighted a plan to give Greece $30 billion as part of a wider bailout to avoid the country's bankruptcy. The German contribution is the highest of the 16-member eurozone.


French Finance Minister Christine Lagarde told Europe-1 radio Monday the package was "not a donation, not a subsidy" but a loan that would be repaid.

European governments and the International Monetary Fund agreed to the $145 billion loan package over three years for Greece on Sunday, with governments rushing to pass legislation so that the money can be unlocked.

"We have to protect our country and Europe from taking damage," said Guido Westerwelle, German foreign minister and vice chancellor. "Protecting the currency is politically of utmost importance."

The remarks by the officials were a nod to voters in Germany, who are largely opposing bailing out Greece with public money.


The government parties face a crucial election Sunday in North Rhine-Westphalia, Germany's most populous state and Merkel has insisted that Athens commit to a new austerity program -- which, to great relief, was unveiled Saturday -- to appease German voters.

German Finance Minister Wolfgang Schaeuble told Monday's Bild newspaper that German taxpayers won't have to pay extra taxes to stabilize the Greek budget.

The rescue package, he said, is "sufficient to stabilize the country on a long-term basis." He added, however, that more funds could be made available if necessary.

Yet Schaeuble warned Greece that the "smallest deviation" from its austerity plan "would have consequences, that much is clear."

Economic experts are much more pessimistic, however.

The austerity measures have sparked demonstrations in Greece, with people there moving savings out of the country, further slowing domestic spending.

"If investors are doubting that they'll get their money back, then states will not get it, that's sure," Hans-Werner Sinn, a leading German economic expert, told Bild. "The money is at risk. I fear that Greece will bank on getting a debt relief."

Economist Ulrich Blum told Bild that Greece will need "help by the eurozone states until at least 2015." He added: "The need for debt conversion will then amount to around $260 billion. It will take at least until 2020 to lower its debts to a normal standard."


Greece needs more than $13 billion to cover debt coming due May 19. Athens has around $400 billion in overall debt, with $72 billion coming due in 2010.

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