Ode to a Grecian Urn
Leaders of the 16-nation euro region endorsed a Franco- German proposal for a mix of IMF and bilateral loans at market interest rates, while voicing confidence that Greece won’t need outside help to cut Europe’s biggest budget deficit.“It’s an extremely clear political message,” European Union President Herman Van Rompuy told reporters after the leaders met in Brussels late yesterday. “It’s a mixed mechanism but with Europe playing the dominant role. It will be triggered as a last resort.”
After objecting to a possible IMF intrusion on the $12 trillion euro-region economy, the ECB endorsed the package, with President Jean-Claude Trichet saying that European governments will remain in control of the process.Trichet, who told France’s Public Senat television earlier that surrendering control to the IMF would be “very, very bad,” held his own press conference after the summit to revise the comments. (via EU Steers Greece to IMF, Pledges Loans in Last-Resort Update1 – BusinessWeek).
On January 9, Standard & Poor’s announced that Greece, Spain and Ireland were on review for a possible downgrade, indicating that a Euro-zone country could default. The Greek situation acquired some urgency, as redemptions are due soon. Greece cannot be left to fend for itself, without reducing the credibility of the EU among its own member states – and may turn out to be the acid test for the EU and the Euro. But EU-Zone economy is contracting now for the last 18 months.
Britain and Sweden are suggesting that IMF is better suited to handle the Greek situation – rather than the ECB. Germany and France, being the economic and political leaders of the Euro-pride brigade, are worried about IMF entry into Europe.
The gross debt (government, private, corporate) of the Greece, Hungary, Ireland, Italy, Portugal, Spain, UK, US are all above 200% – going upto more than 1000% in case of Ireland.