IMF Chief Says Greece May Need More Aid
International Monetary Fund Chief Dominique Strauss-Kahn held talks in Berlin and said that Greece may need 120 billion Euros to resolve its debt crisis. Strauss-Kahn said it is too soon to release details of the bailout package. The lack of details about the EU, ECB and IMF agreement has made investors wary sending the euro lower in currency markets. The Greek/German bond spread was at 792 basis points after rising above 1,000 basis points. Strauss-Kahn stated, “If all this goes together rapidly, I’m really confident that the problem will be fixed. But if we don’t fix it in Greece it may have a lot of consequences on the rest of the European Union.”
German Finance Minister Says Aid Package Will Be Approved Quickly
Germany has been slow in addressing the Greek aid package and feels that Greece misled the EU about the state of the nation’s finances and at present it is not clear how the EU will raise the additional money. The approval for the Greek aid package has put Chancellor Merkel in a difficult political position because most Germans oppose any aid for Greece and some newspapers have called for Greece to leave the EU. Some political observers say that the approval of the aid package could cost Merkel’s center-right party votes in the upcoming elections. German Finance Minister Wolfgang Schaeuble said that the aid package will be swiftly approved as soon as all parties agree on the details. Schaeuble stated, “The stability of the euro is the question, the last resort question. We’re seeking backing in the parliamentary groups to for a speedy process, by Friday. And then we’ll pass a corresponding law next Monday.” EU leaders said that they will protect Greece and dismissed fears that the crisis could spread to Portugal. Addressing the French Parliament French Prime Minister Francois Fillon stated, “The European Union, the euro zone states are going to assume their full responsibility regarding Greece” and added “What might seem as hesitation on the part of the German government will vanish today.”
Greece and Portugal Downgraded
Standard and Poor’s downgraded Greece and Portugal slashing Greece’s rating to junk status and Portugal’s to A-. ECB Executive Board member Juergen Stark said that EU governments need to put national finances in order and that current fiscal and monetary policies are not sustainable. Stark stated, “The onus is now on governments to ensure that the crisis that initially affected the financial sector, and subsequently the real economy, does not lead to a full-blown sovereign debt crisis. Averting it will require very ambitious and credible fiscal consolidation efforts. In fact, substantially stronger consolidation efforts than those conceived so far.”
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