Archive for May, 2012

Greek Debts

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The message sent by the Greeks have their vote is clear: they do not want the memorandum which paved the way for the second program of international funding. And that message seems to have been received. Greece “has tested the limits of what people can endure,” admitted Horst Reichenbach, the leader of the Task Force of the European Commission in Athens. However, the Europeans are not willing, to date, to re-discuss the memorandum. What makes the market particularly nervous.
Investors are questioning the possibility of an outflow of Greece in the euro area and its consequences for the whole region. Yesterday the euro slipped below $ 1.30 for the first time since late January, the borrowing rate of “peripheral” countries were strained, the Spanish 10 years even crossing the symbolic threshold of 6%. The Madrid Stock Exchange ended the day at its lowest levels in nine years. Another sign of anxiety: the German debt was much sought after, which allowed the best student in the eurozone to borrow at exceptionally low rates.
For now, Greece is not listening. All parties that won seats in the assembly toying with the idea to renegotiate any part of the memorandum. In Brussels, it is emphasized that it does not contain measures of fiscal consolidation, but also a whole series of structural reforms to sustain growth. Yet it is these reforms that the majority of Greeks rejected, including those whose application has resulted in significant decreases in wages and pensions.
In Europe, supporters of a relaxation of conditions imposed on Greece are few. A small gesture has to be done, however: Europe is about to pour today a slice of funding of 5.3 billion euros. For more, international creditors pose the threat to suspend all aid to Greece if the next Executive does not confirm the commitments already made.
If Greek officials insist on wanting to renegotiate the memorandum, the IMF will consider funding the program is no longer viable and immediately withdraw its support. A possibility that the Europeans would face a dilemma of historic importance: continue to fund Athens without the institution of Washington or let sink into bankruptcy by pushing and outside the euro. With the key risks of contagion to Spain and Italy. The return of Greece to the drachma would severely weaken the spirit of European construction whose consequences would be measured not only in terms of against jolts markets. A new showdown with Athens so moved.

Written by chaiyan00

May 10th, 2012 at 2:06 am

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