Greece's loan repayments extended

Debt-strapped Greece will likely get more time to repay the bailout loans that saved it from defaulting, a top EU official indicated yesterday, as the union sought to keep its government debt crisis from mushrooming.

There are fears Greece will be unable to cope with a spike in debt repayments in 2014 and 2015 as it pays back loans from the three-year EU and International Monetary Fund program that ends in 2013. The European Commission is following EU governments in considering extending the amount of time Greece has to repay its debts to match the roughly seven-and-a-half years that Ireland has for its bailout.

"We stand ready to make the proposal early next year, and I'm certain that it will receive the support of EU finance ministers," EU monetary affairs commissioner Olli Rehn said after meeting with Greek finance minister George Papaconstantinou.

The move comes as EU officials make efforts to ease the pressure in debt markets that forced Ireland's rescue last week and threatened to engulf Portugal as well as larger economies like Spain and Italy. While the EU has resisted further big moves, such as boosting its bailout fund or creating European bonds to share the debt burden, it has focused on austerity plans and making bailout repayment terms more flexible.

Fears of default pushed bond yields for troubled countries so high they face being unable to borrow at affordable rates and roll over expiring debt.

The details of how Greece's repayment extension would work have not been decided.

Mr Rehn said he did not believe Greece would need to ask for a new bailout loan from the EU after the current one runs out. Instead, the Commission was "in favour of a prolongation of the repayment period of the loans… in order to avoid the big hump of refinancing" in 2014 and 2015, Rehn said.

He said that turbulence in financial markets continued even though economic recovery had begun in the eurozone.

"Our main challenge now is to contain the financial turbulence so that it will not contaminate the ongoing economic recovery that is so important for jobs and welfare of all Europeans, including of course the Greeks," Rehn said.

"The current market turbulence has increasingly systemic features and therefore there is a need for a comprehensive systemic response that combines both European and national efforts which are indeed going on for the moment," he added. "We are all in the same boat in Europe… and therefore we all need to work together."

That echoes a call by IMF chief Dominique Strauss-Kahn earlier this week for a "comprehensive solution," but Germany and France - Europe's twin economic engines - resist any more big commitments.Both are against increasing the bailout fund from €750 billion and the creation of European bonds.

In Greece's case, the extension addresses fears that its economy will not be growing sufficiently by 2013 to generate enough revenue to pay back its debts if it had to pay back the full IMF/eurozone loan in 2014 and 2015. Rehn said the extension "will mean that we will be able to go beyond and stabilize (Greece's) debt dynamics and overcome the hump in debt repayment, especially in 2014 and 2015."

Greece must lower its budget deficit from the 15.4 per cent of gross domestic product it stood at in 2009, to below the eurozone limit of 3 per cent of GDP by 2014. Its finances are under strict supervision by the IMF and EU, and the quarterly disbursement of bailout loans depends on Athens meeting financial targets.

The austerity measures have led to a backlash from labour unions, who say they are causing ever-increasing hardship. Unions have staged a series of strikes and demonstrations. Greece's seventh nationwide general strike this year has been called for 15 December