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Beware of Greeks
European finance ministers agreed Friday to release their part of an 8 billion euro international loan package to prevent Greece from defaulting, as euro zone nations begin six days of meetings to quell the debt crisis.
France and Germany are currently working together to increase the strength of the euro zone’s bailout fund, and the deal struck with Greece “provided some rare good news for ministers battling to produce a package of measures to reassure anxious markets.”
The euro zone is now working against a self-imposed deadline of Wednesday to deliver a comprehensive solution to the worsening crisis.
A statement from the ministers said: “The loan to Greece will go ahead in the first half of November subject to approval from the board of the International Monetary Fund, which finances about one-third of the payment.”
However, a “report from international lenders increased pressure on banks to accept big losses on Greek debt by suggesting that a 60 percent haircut for bondholders would be need to bring debt below 110 percent of GDP by 2020.”
Without action, Greece’s financing needs could amount to “some 252 billion euro from the present through to 2020,” the document said while, under a worse economic scenario, “cumulative additional financing needs (including rollover of existing official debt) could approach 450 billion euro.”
At the commencement of the talks European officials, however, were at a loss as to how to cut Greece’s massive debt.
Still, if not absolved quickly, the debt crisis threatens to derail more than five decades of European integration.
Read more at the New York Times.
Update September 14, 2011:
Greece’s insolvency is causing a raucous throughout Europe and has led to fears of “domino-effects,” and the collapse of the Euro Zone.
Most recently, Greece has tried their hand at austerity only to spook other European countries into planning for the worst. Germany in particular, is caught between bracing for potential disaster and hoping that it won’t ever come.
While Chancellor Merkel has made her intentions clear, “everything must be done to keep the euro area together politically,” many others are unhappy (76% of Germans) at the prospect of further bailouts and the too-late austerity. Germany’s Finance Minister has formulated models of a Greek default within the Euro Zone and outside of it to better prepare for a worst case scenario.
One Economist, having helped orchestrate Argentina’s recovery, suggested that Greece should default as big as they can.
Original Post-September 10, 2011
Greek Prime Minister, George Papandreou, announced that he’s moving forward with unpopular budget and spending cuts to ensure the debt-ridden country’s survival.
Greece is currently struggling to meet the terms of loans granted to it by eurozone leaders in July. The nation’s second bailout, worth 109 billion euros, was taken while the government fought to meet conditions for the first 110 billion euro loan it received last year.
Despite their failure to pay back the initial bailout in a timely manner, the Greek government is criticizing other eurozone states for delaying the ratification of the second bailout.
Papandreou’s controversial speech was an attempt to reassure EU and IMF lenders, who are frustrated with the lack of progress with reforms and financial policies, that he is willing to go against what the people want in order to do what is best for Greece.
The Prime Minister was quoted in a recent statement saying “We will push though all the major changes our country has needed for years,” and “[w]e don’t have the right to abandon this effort halfway through because if it remains half-done, [our] sacrifices will have been in vain.”
Recently, protestors in Thessaloniki voiced their anger during Papandreou’s speech by starting fires and throwing stones. Activists blamed the government for Greece’s current financial downfall. One banner in particular read: “We owe nothing, we pay nothing, we sell nothing, we fear nothing.”
Whatever the case may be, Papandreou certainly has his hands full between catering to the IMF’s demands for repayment and the civil unrest of his people.
Read more at BBC News.