Global financial officials send tough-love message on emergency aid to drowning-in-debt Greece

Tough-love line to Greece from finance officials

WASHINGTON — Tough times require tough love, world finance officials are telling a drowning-in-debt Greece: adopt no economic austerity overhaul, expect no emergency loans.

The escalating crisis was expected to dominate discussions as finance ministers on the steering committee of the 186-nation International Monetary Fund held a daylong meeting that was part of the regular spring gathering of the IMF and World Bank.

Greece’s finance minister, George Papaconstantinou, planned meetings with the IMF’s managing director, Dominique Strauss-Kahn, as well as Treasury Secretary Timothy Geithner and officials from Russia and Brazil.

Crippled by soaring borrowing costs, Greece triggered an emergency aid plan Friday to draw cash from the IMF and countries that use the euro. There’s enough money in the package to prevent Greece from defaulting on its debts. Eurozone members will contribute $40 billion, while the IMF will provide $13.4 billion this year.

Greece is putting in place an austerity program that cuts civil servants’ pay, freezes pensions and raises taxes. But the country faces years of painful cutbacks and doubts about its long-term finances.

The IMF is expediting review of Greece’s request for emergency aid.

“You can read a much greater sense of urgency, and that is welcome,” Geithner said Friday after a meeting of finance officials from the Group of 20 countries. “Based on what I heard, they (Greece) are going to move much more quickly to put in place a strong package of reforms.”

The G-20 is composed of the world’s wealthiest industrial countries plus major emerging economies such as China, Brazil, India, South Korea and Russia.

Greece’s debt crisis is a “source of concern,” Canadian Finance Minister Jim Flaherty said. But the G-20 didn’t directly address the matter in their joint statement.

The EU’s monetary affairs commissioner, Ollie Rehn, did brief the G-20 officials on the Greek aid plan. The Greek crisis “has potential implications for financial stability in the European Union and globally.” Rehn said he believed the EU-IMF aid package could be completed by early May.

French Finance Minister Christine Lagarde said she expected to have French parliamentary approval by May 10. Other countries in the eurozone do not have to go to their parliaments for approval, she said.

Despite Greece’s deepening problems, global financial leaders said the world’s economy is recovering faster than expected from the worst recession in decades.

The G-20 members papered over sharp differences over proposed new taxes on banks to keep taxpayers from being saddled with the cost of future financial bailouts. The proposed new taxes would also be aimed at restraining the kind of excessive risk taking that led to the crisis.

The joint statement said countries would work together to come up with ways to ensure that banks make a “fair and substantial contribution towards paying for any burdens associated with government interventions to repair the banking system.”

The goal is to present a plan to President Barack Obama and other G-20 leaders when they meet in late June in Canada.

Canada is leading the opposition to new bank taxes, arguing that would not be fair to its banks — which did not suffer costly failures in the recent crisis.

Geithner said the Obama administration hoped to set a good example for other countries by winning congressional approval for a strong overhaul of financial regulations in the United States. Senate debate on the measure is expected to begin in the coming week.

Associated Press writers Desmond Butler, Foster Klug, Harry Dunphy and Ana Azpurua contributed to this report.