Greece requests loan aid after pensions 'shock'

ATHENS (AFP) – Greece requested a first emergency loan of 20 billion euros from the EU and IMF on Tuesday to avoid bankruptcy after the government unveiled radical pension reforms that have alarmed the country.

A street musician picks up 20 cents from his plate in downtown Athens, May 11. AFP photo

The money will be the first tranche of an unprecedented 110-billion euro (140-billion dollar) rescue package agreed with the European Union and the International Monetary Fund this month in return for drastic budget cuts.

"We have made the request to the European Commission, the European Central Bank and the International Monetary Fund," a finance ministry official told AFP on condition of anonymity.

The tranche of 14.5 billion euros from the EU and 5.5 billion euros from the IMF "should be available possibly within the day," the official said.

Greece needs nine billion euros by May 19 to meet debt repayments and tens of billions more in the next few months as its access to debt markets has effectively been blocked by high rates demanded by investors.

The yields on Greek 10-year government bonds rose to 7.850 percent during trading on Tuesday from 6.717 percent late on Monday, indicating a loss of investor confidence.

Greek borrowing costs narrowed dramatically on Monday in an initially positive reaction to a broader EU-IMF rescue deal for debt-strapped eurozone members, worth 750 billion euros.

But as investor doubts about the capacity of governments to rein in their debts grew on Tuesday, the Greek stock exchange fell 2.53 percent, mirroring losses elsewhere in Europe.

The debt crisis has sparked major protests in Greece, including three general strikes in as many months and large-scale demonstrations in the streets of Athens last week in which three people died in a fire-bombed bank.

Greece's two main trade unions are preparing a major rally for Wednesday.

"The workers, the pensioners and the unemployed want the rich to pay for the crisis and the taxes," said a spokeswoman for the GSEE private sector union.

The Communist-affiliated trade union association Pame called for a "counter-attack" against the government's plans, calling them "a monstrosity."

An editorial in the Kathimerini daily warned that far-left movements leading the protests were on "an irrational path."

"If we allow it to continue down this path, the price that will be paid by the institution of democracy and by the country as a whole will be incalculable," it added.

Greek newspapers meanwhile reacted with alarm to the pension reform unveiled by the government on Monday as part of its efforts to reduce the public deficit from around 14 percent to under the EU limit of three percent by 2014.

"Triple shock to pensions" said pro-opposition Eleftheros Typos, pointing to pension cuts, higher contributions and tougher retirement rules.

"40 years of work for a 35-year pension," added the left-wing Eleftherotypia daily while the pro-government To Vima daily spoke of "Wild cutbacks."

"There is a way out for the people," the Communist party mouthpiece Rizospastis said. "The monumental demonstrations of recent days are a hopeful sign that workers are not prepared to submit."

Labour Minister Andreas Loverdos acknowledged that the abolition of thrice-yearly bonus payments that many Greeks have come to rely on to supplement their pensions was "unfair" and said that they could be restored for lower-income categories.

"The measure taken to cut pension bonuses was unfair and we aim to restore them" if Greece makes progress in cutting costs in other sectors later in the year, Loverdos said in an interview on Flash Radio.

In presenting the reform on Monday, Loverdos told the cabinet that the pension system faced "collapse" in 2015 without reform.

The new system would see an average reduction in pensions of seven percent by 2030 while the upper category of pensions would be cut by up to 14 percent.

The reform would also raise the average effective retirement age to 63.5 from 61.4, curbing Greece's widespread early retirement schemes.

Other news