EU poised for Greece crisis talks

By Paul Anastasi in Athens, and Louise Armitstead

Senior officials from the European Union, the European Central Bank and the International Monetary Fund are expected to make a "lightning visit" for two days to ensure Greece can meet plans to cut its deficit by €24bn (£21bn). The trip is being planned for May 9, although insiders said this could be brought forward to May 5.

George Papandreou, the Greek prime minister, and other Greek officials have this weekend strongly denied rumours that Greece may be forced to restructure its debt imminently – possibly as early as this weekend.

A year after Greece was forced to accept €110bn (£97bn) of financial aid from the EU and IMF, Greek government spokesman George Petalotis denied "the persisting international reports about a restructuring of the debt". George Papaconstantinou, the Greek finance minister, said that a restructuring or an extension of any of the €340bn national debt, which is set to hit 160pc of GDP by next year, was out of the question.

However, Greek news channels have continued to broadcast the rumours. The biggest network, Mega TV, on Saturday reported a government official saying that "in the worst of cases, a rearrangement rather than a restructuring will take place in the future, featuring an extension of the repayment period for the loan, as has been granted for other countries".

The influential newspaper To Vima reported that, in addition to the lengthening of deadlines for repayment instalments, Greece might seek a 30pc reduction in the debt itself. But it said such a decision might take "up to six months".

European officials are determined to avoid the need for Greece to change the terms of its debt repayments. On Saturday Jurgen Stark, an executive board member of the ECB, warned that a restructuring of debt in any of the troubled
eurozone countries could trigger a banking crisis even worse than that of 2008.

"A restructuring would be short-sighted and bring considerable drawbacks," he told ZDF, the German broadcaster. "In the worst case, the restructuring of a member state could overshadow the effects of the Lehman bankruptcy."

Fears among the international community have been met with increasing anger in Greece. On Friday, Mr Papandreou lashed out at the credit rating agencies. In a piece posted on a Greek government website, the prime minister said the agencies were "seeking to shape our destiny and determine the future of our children".

Meanwhile, Greece's finance ministry has asked the local prosecutor to launch an investigation after a banker at Citigroup warned clients of the potential need for a debt-restructuring. In an email the Citi employee said: "There seems to be some increased noise over Gr[eek] debt restructuring as early as this Easter weekend."

Citigroup said: "We are co–operating with the authorities and do not consider there to have been any wrongdoing by Citi or its employees."

When the markets closed before the Easter weekend, Greek credit default swaps hit a record high of 1,335 basis points, up 53 points, pushing the annual cost of insuring £10m of the government's debt to more than £1.3m.

Last week the Greek government unveiled plans to raise €50bn over the next two years from a sale of national assets including palaces, marinas and beaches.

Athens has said it will also implement fiscal measures worth €26bn in an attempt to reduce the budget deficit to 1pc of GDP by 2015. The plans have sparked a fresh wave of anger in Greece and more threats of strikes and marches from trade unions.
Telegraph