Greece Calls For EU/IMF Talks
On Thursday Greek Prime Minister George Papandreou asked for talks with the European Union, the International Monetary Fund and the European Central Bank EU Economic and Monetary Affairs Commissioner Olli Rehn stated, “It’s a matter of preparing a joint program of conditionality and financing if needed and if required.” German Finance Minister Wolfgang Schaeuble said that the EU and the IMF need to cooperate to “restructure these deficits” in Greece. The IMF may require Greece to cut spending on public employees and cut pension payments. Many believe that further austerity will cause unrest in Greece where earlier measures sparked riots and demonstrations throughout the country. Giada Giani of Citigroup said that the Athens meeting “is an important step as it links the availability of external financing to Greece implementing a set of structural reforms. These probably will go well beyond the tightening measures that Greece has put in place up to now, which may help to reduce the deficit for 2010 but do little to tackle Greece’s long-term solvency issues.”
Austerity Measures Unpopular
According to a recent poll two thirds of Greeks disapprove of the way the government has handled the crisis and Greece’s largest union promised “dynamic” resistance to pension cuts. Papandreou told Parliament that the austerity measures “will hurt, but think what would have happened with bankruptcy.” The Athens government has cut spending, raised taxes and has cut wages in an attempt to reduce the nation’s deficit from 12.9% of GDP to 8.7% this year. German Minister of Finance Wolfgang Schaeuble said in a radio interview, “We agree Greece should now also undertake the required preparations with the International Monetary Fund.” Schaeuble also said that while the Greek restructuring plan “isn’t really on track, you will always have new speculation in the financial markets.” Political opposition to any aid package for Greece is widespread in Germany. The EU is attempting to prevent the first default of an EU nation which would damage the credibility of the Euro Zone and its multi nation currency.
Finance Ministers to Address EU Problems
At this weekend’s meeting of European finance ministers and central bank governors from the 27 EU member nations taking place in Madrid the Euro Zone leaders will try to close budget gaps in member states which have been hard hit by the worst recession since the Great Depression of the 1930’s. ECB executive board member Juergen Stark said in Washington, “I am particularly concerned about the dramatic deterioration in public finances, which will require very ambitious fiscal consolidation efforts in the years to come.”
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