Greece - economic crisis

No bail-out for Greece as debt hits 300 million euros

Article published on the 2009-12-10 Latest update 2009-12-10 15:25 TU

Greek Finance Minister Georgos Papaconstantinou (R) in talks with European Central Bank President Jean-Claude in Brussels earlier this month
(Photo: Reuters)

Greece has admitted that its national debt has reached a record 300 million euros, further raising fears that the country is about to go into economic meltdown. Eurozone chairman Jean-Claude Juncker, however, has insisted that Greece is not about to go bankrupt.

Greek Prime Minister Georgos Papandreou; who only came to power in October, called an all-party crisis meeting, to be held next week, in a bid to calm alarm on stock markets and throughout the eurozone.

"We are sending a powerful message abroad showing that we're determined to move forward, to clean up our economy and ... give hope to every Greek citizen," said Papandreou.

Greece’s credibility has been severely damaged by the revelation that the public deficit is expected to surge to 12.7 per cent of output this year and that debt amounts to 113 per cent of gross domestic product.

The Greek markets have suffered badly recently, losing ten percentage points in two days earlier this week following ratings agency downgrades of government debt bonds.

Fitch Ratings cut Greek debt to BBB+ with a negative outlook, citing fiscal deterioration in the euro zone's weakest member. It is the first time in ten years a major ratings agency put Greece below an A grade.

The economic outlook grew even darker on Thursday when official statistics were released showing that unemployment had risen to 9.1 per cent in September on an annual basis with over 450,000 people out of work. Industrial production also slumped 9.2 per cent in October on an annual basis.

In spite of that, Greece is certain to remain within the 16-nation Eurozone although chairman Juncker said there would be no bail-out package.

"I completely exclude a state bankruptcy of Greece," he told reporters in Bonn on Thursday.

In Vienna, ECB governing council member and Austrian central bank chief Ewald Nowotny, also discarded the bail-out option.

"An exit or something similar from the eurozone would be totally unrealistic for Greece, and also not do-able,” he said.

“The 'No bail-out' principle is anchored in the EU treaty and has to be taken absolutely seriously. It is not possible to defuse the problem here through direct financing."

The crisis was to be debated by EU leaders at a summit in Brussels.

German Chancellor Angela Merkel said the European Union shared a "common responsibility" for Greece.

"What happens in a member country influences all the others, particularly when you have a common currency," she said.

Internal eurozone worries are now beginning to extend to Ireland and Spain, which have each received warnings from the ratings agencies. Standard and Poor's has also since cast doubts over Portugal's prospects.