Greece is scheduled to repay a 8.4bn Euro loan to investors on May 19th; unfortunately it coincides with an all time low for the country’s economy. Greece’s finance ministry is in discussion with the European Commission and the IMF, producing a joint paper by 19th May. The country is struggling to come up with plans to reduce its 300bn euro debt over the next three years. The country aims to seal an agreement for a swift 40bn euro payout from the IMF and Eurozone members.

In a recent statement, Greece’s finance ministry said: “The discussions concern a three-year programme of economic policies, which can be supported with financial assistance from eurozone members and the International Monetary Fund should Greek authorities decide to request the activation of the mechanism.”

The IMF has offered 10bn Euros with the remaining 30bn from a selection of eurozone members. The discussions aim to clarify the exact terms, conditions and rates that would be applied to the aid if agreed. However many experts speculate the astonishing 40bn Euros might not be enough. Axel Weber of the European Central Bank Governing Council denied speculation that a minimum of 80bn Euros would be required to simply avoid defaulting on previous loans.

The Greek government has been hit by rising borrowing costs as lenders demand a higher return on providing money to repay existing debts. Athens was able to raise almost 2bn Euros by selling three month treasury bills but although the fund-raising was successful, the interest rate was 3.65%, more than twice the level of loans secured in January.

By June, Greece will need to raise about 11bn Euros and a further 35bn Euros during 2010 to cover costs such as public service pensions. Financial advisers throughout the EU have warned that coming to Greece’s aid and subsequently bailing them out with what can only be described as a ‘blank cheque’ could have damaging effects on the economy of that country.

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