Expect Contagion in Europe, Greek Debt Crisis Will Spread; New Wave of Riots in Greece
Courtesy of Mish
Given that the European Commission has been 100% wrong 100% of the time in its ability to yap away the problems in Greece, I take the opposite side of Greek Debt Crisis Won’t Spread Through Europe, Officials Say
European Central Bank officials dismissed speculation that Greece’s budget crisis will spill over to other countries in the euro region.
“There is no economic cause for a contagion discussion,” ECB Governing Council member Ewald Nowotny said in an interview in Washington.
Concern that Greece’s woes could spread to other indebted euro-area countries has been pushing up borrowing costs of nations including Portugal and Spain. The countries’ budget deficits as a share of gross domestic product were more than three times the European Union limit of 3 percent last year.
“Of course Spain is not Greece,” ECB President Jean- Claude Trichet said April 23 after meeting with Group of 20 finance chiefs.
Greece on April 23 asked to activate the funding mechanism agreed by euro-area nations earlier this month. The request for as much as 45 billion euros ($60 billion) is an unprecedented test of the euro’s stability and European political cohesion.
Greek Finance Minister George Papaconstantinou yesterday told investors they will “lose their shirts” if they bet cash- strapped Greece will default. Speaking to reporters in Washington, where he was negotiating terms for a three-year loan package with the International Monetary Fund and European governments, Papaconstantinou expressed confidence the talks will be “concluded rather soon” and said his country wouldn’t restructure its debt.
With 8.5 billion euros of Greece’s bonds maturing May 19, finance chiefs want a swift agreement amid concern any delay may trigger a further sell-off in its assets and hurt global markets.
“Is there a risk for other countries in the zone? No, the other situations have absolutely nothing to do with that of Greece,” Bank of France Governor Christian Noyer, who represents his country on the ECB council, said April 24.
Greece Hit By New Riots
The Mail Online is reporting Greece hit by new riots as pressure grows to quit euro
Riots erupting during workers’ protests over planned public spending cuts, just hours after Greek Premier George Papandreou sought emergency £35billion of loans from eurozone countries and the International Monetary Fund.
The Greek government was finally forced to ask for international help after the cost of its borrowing spiralled to a new high, making it prohibitively expensive to borrow money to service existing debts.
Leading members of Germany’s Christian Social Union, sister party in Bavaria to Chancellor Angela Merkel’s Christian Democrats, said Greece should be forced out of the euro.
Leading CSU MP Hans-Peter Friedrich said: ‘Greece has not only a liquidity problem but also a fundamental growth and structural problem.’ He said that this should prompt Greek politicians to ‘seriously consider leaving the eurozone’.
Werner Langen, head of the CDU/CSU group in the European Parliament, added: ‘I am extremely skeptical as to whether the aid package conforms with European Union law and the German constitution.
‘The real alternative is for Greece to leave the currency union and become competitive again via hard structural reforms.’
Chancellor Merkel, whose country is the largest contributor to the Greek bail-out, has said she would be reluctant to help unless the stability of the euro was threatened and the Greek government implemented tough reforms.
Restructuring Not Off the Table
Greek Finance Minister George Papaconstantinou says Debt Restructuring ‘Off the Table’
Greece will not restructure its debt as part of a plan to seek a bailout from the European Union and International Monetary Fund, Finance Minister George Papaconstantinou said today.
“Any notion of restructuring is off the table for the Greek government, has never been put on the table of negotiations and has never been part of any suggestion or proposals made by the IMF to Greece,” he said at a press conference in Washington.
That statement is clearly preposterous. If it is too painful to tell the truth, then it’s better to say nothing at all. Nothing is off the table at this point and it is foolish to state otherwise.
