The Greek-EU debt crisis is taking a new twist with the expected arrival in Athens today of experts from the International Monetary Fund amid uncertainty over the status of a vague EU-IMF safety net.
Greek sources say the IMF mission is merely to offer advice on managing its crippled budget, but there is deep unease in financial markets about the outlook.
Greece, a member of the eurozone, has revealed that it is planning a huge operation to borrow in dollars the equivalent of €11.5 billion to meet an urgent need for funds.
It would raise the money by May to cover its bills until the end of May, the state debt management office said last week. It would still need €32.5 billion more to pay its bills to the end of the year, and faces paying about 15 per cent of tax income in interest.
At ING Bank, interest rate strategy analyst Padhraic Garvey commented on Tuesday that there was "talk now of a dollar deal" to raise dollars to be swapped into euros.
He said: "Latest soundings out of Greece are a little troubling."
This was because of reports that Greek sources now wanted to change understandings for help so as to bypass the IMF. "This will trouble investors, just as they've gotten their heads around an IMF solution for an EMU (eurozone) member."
The pressure on Greece is becoming critical because it has to redeem old debt totalling about €20 billion by the end of May, and the government has warned that some pension payments are not currently funded from June.
But a tortuously and vaguely conceived safety net cobbled together by the EU has not pulled down the high market rates the Greek government is forced to pay to borrow. They are running at about 6.5 per cent, a level the government says is unbearable and experts warn would soak up much of the budget cuts.
The Greek debt drama, coupled with threats by Prime Minister George Papandreou to ask the IMF for help if the EU did not offer support, have caused enormous strains in the EU and eurozone.
Germany in particular is strongly reluctant to offer help, saying that high Greek borrowing costs alone would not be a reason to enact the safety net and that the only justification would be a threat to stability of the eurozone.
Among the constraints on German Chancellor Angela Merkel are hostile public opinion and rulings by the constitutional court that German participation in the eurozone must provide the same stability for Germany as it had before joining the zone.
The ECB, which is independent in managing monetary policy for the eurozone, has shown particular concern about maintaining credibility, meaning the standing of the ECB, the euro and the level of interest rates, if the EU allows or asks the IMF to interfere with a formal support programme for Greece.
The IMF experts arriving today are coming at the request of the government to give advice on how to manage its budget in line with draconian cutbacks promised to the European Union.
They will also advise on how to combat tax fraud, widely considered to be an endemic and crippling problem for Greece.
An official at the finance ministry, who declined to be named, said: "It is not at all a control, but a mission to provide technical help."
The experts, some of whom would meet Finance Minister George Papaconstantinou today, would stay for about two weeks, the source said.
They would return to Athens in the first half of May, this time to assess how the Budget was being applied under a three-way mission of the IMF, the European Union Commission and the European Central Bank for a formal assessment by the Commission on May 15.