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EU Moves On Greek Crisis

  • February 12th, 2010
  • Posted by 7thmin

Tcouncil-building2.jpghe European Union has declared the Greek government must take further initiatives to subdue its debt and budget deficits, and has offered support for carrying that out.

TOUGH LOVE

The Heads of Government of the EU met at Brussels (11.2.10), putting off planned discussion of economic recovery in Europe, out of the global recession, to give urgent attention to the new crisis in Greece – with similar problems developing in other member countries.

It’s a “rough love” response, the government leaders saying help can be provided with Greece’s credit problems but it will need to do much better complying with agreements on economic management. (See EUAustralia, “Tight Times …”, 10.2.10).

The President of the European Council, Herman Van Rompuy, said changes being made in Athens, taking in public service job cuts and taxation measures, were a necessary “stability project”.

“We call on the Greek government to implement all these measures in a rigorous and determined manner to effectively reduce the budgetary deficit by 4% in 2010”, he said.

Greece has not asked for help but its Prime Minister, George Papandreou, said “if necessary”, it was prepared to follow an EU prescription.

DETAILS COMING

Finance Ministers of the EU met at Brussels earlier this week and will be back next week, 15-16.2.10, to work on details of action which Mr Papandreou’s government will be told it should take.

They are expected to consider debt relief not a bail-out – support for Greece in obtaining finance rather than direct grants.

They must also insist on compliance with rules for maintaining the Euro currency, especially limiting national budget deficits to under 3% of GDP – Greece currently at more than 12.5%.

“There are rules and these rules must be adhered to”, said Angela Merkel, German Chancellor, at this week’s Brussels summit.

INSECURITY

Heavy public debt in Greece, Portugal and Spain  — with different degrees of difficulty also in Ireland, Italy and France – has put pressure on interest rates on their government bonds; causing a crisis now as debts come up for renewal.

The insecurity has damaged the economic recovery process, with stalled prices on stock exchanges and  weakening of the Euro amid speculation about the idea of some of the 16 countries so far participating in the Eurozone, having to drop out.

Reference

BBC News, London, “EU ready to help Greece over debts”, 11.2.10. www.bbc.com (12.2.10)

Jim Brunston, “Contagion fears cast shadow over eurozone”, European Voice, Brussels, 11.2.10. http://www.europeanvoice.com/article/imported/contagion-fears-cast-shadow-over-eurozone/67102.aspx

Picture  European Council venue at Brussels

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