ATHENS, Greece — Cash-strapped Greece managed to pay off its creditors Wednesday — warding off bankruptcy in the nick of time — by using billions of euros from the EU-led rescue package aimed at containing the debt crisis.
Finance ministry sources said the government redeemed euro8.5 billion ($10.43 billion) in expiring 10-year state bonds, which it was unable to raise without outside assistance as wary investors have sent Greek borrowing costs sky-high.
Just a day earlier, the country had received euro14.5 billion ($18 billion) from 10 of the other 15 European Union countries that use the euro. The loans are part of a euro110 billion ($136 billion) joint EU and International Monetary Fund rescue package.
Greece’s debt crisis sent shockwaves through global markets and, combined with fears for Europe’s struggling economy and German warnings that the future of the euro itself was at stake, sent the common currency to a four-year low against the dollar Wednesday.
Athens received the first euro5.5 billion tranche from the IMF last week, and the second and final installment for this year — an estimated euro18 billion ($22 billion) — is expected in the autumn.
Prime Minister George Papandreou said the bailout had earned the heavily indebted country, whose public finances lie in tatters after years of state overspending, waste and rampant tax evasion, time to sort itself out fiscally.
“This … gives us this opportunity to breathe and to take the big initiatives for institutional changes in our economy and in the structure of our state itself,” Papandreou said.
To secure the foreign loans, his center-left government took a hatchet to pensions and civil service pay, while pumping up consumer taxes, increasing retirement ages and pledging to fight corruption and tax cheats. The country’s budget deficit reached 13.6 percent of annual output last year, while its public debt is expected to reach 133.3 percent of gross domestic product in 2010.
“These changes need to be made, but they must be made with the citizen and not against the citizen,” Papandreou said.
“We are going towards a model of sustainable development, using the wealth that our country possesses, investing in new technologies, in new products, in order to ensure that we emerge from the crisis as quickly as possible, in the least painful possible way for our citizens.”
But Greece’s war on tax evasion suffered an embarrassing setback on Tuesday, when the deputy tourism minister, a former actress who has posed naked for a men’s magazine, had to resign after it emerged that her husband, a popular singer, owes millions of euros in unpaid taxes
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