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Greek Money Moving After France, Germany Step In …

  • September 15th, 2011
  • Posted by EUEditor

sarkozy-merkel-g-8de.jpgEuropean stock markets, and the price of the Euro, saw some rallying late Wednesday, 14.9.11, after intervention by the French and German leaders to keep the flow of debt relief going for Greece.

Speculation that the Greek government would have to go to an orderly default on its borrowing had intensified as the American credit agency Moody’s  reduced its ratings on two large French banks exposed to Greek debt, Credit Agricole and Societe Generale.

President Nicolas Sarkozy and Chancellor Angela Merkel announced they had pressed on the Greek government, it needed to assiduously follow its undertakings to maintain austerity budgets, as a condition of the second installment of assistance, agreed to in July.

After a telephone conversation with Greece’s Prime Minister, George Papandreou, they said  he had affirmed the “indispensable” plan, which would contribute to the stability of the Eujro currency.

Said Le Monde: “As expected, Mr Sarkozy and Mrs Merkel  have also set out to reassure teh financial markets, declaring themselves ‘convinced’ that Athens will remain in the Eurozone. “’Contrary to recent rumours, all parties concur with Greece remaining in the Euro zone.’”

The report outlined three positions that were  being taken: demands continued for Greece to default and withdraw from the European currency group; some European governments including Finland had argued as the price of their continued support, for an activation of the terms of the European Financial Stability Facility, the joint fund for controlled release of funds in emergencies, to support member states in a sovereign debt crisis; other interests wanted a mutualisation  of debt with the issue of joint European bonds.

The notion of Euro bonds, that could provide more relaxed access to credit to the weaker governments,  has been accepted as a possibility by the European  Commission; however  it is opposed, in particular, in diverse quarters (from banking to populist nationalism) in Germany, where both Greek debt, and resistance to any tactics of bailing out states in trouble, are at their highest.

A Eurozone summit created a relief fund for Greece on 21.7.11 as part of a package to calm the sovereign debt crisis.

Heads of government of the 17 countries using the Euro currency, set up the fund of €109-billion (A$145-billion; xe.com, 22.7.22), at a long session, over seven hours, in Brussels.

It took in a private sector component of €37-billion (A$49.25-billion), and release of the funds over time was made conditional on budget measures to be undertaken by the Greek government.

Reference

Peter Garnham,  “ Euro suffers after French banks’ downgrades”, FT.com, London, 14.9.11. http://www.ft.com/intl/cms/s/0/3b19ad18-debb-11e0-a228-00144feabdc0.html?ftcamp=rss#axzz1Y0EOoge8, (15.9.11).

Reuters, London, “Franco-German statement muddle betrays euro tensions”, 13.9.11. http://www.reuters.com/article/2011/09/13/euroz0ne-sarkozy-merkel-idUSLDE78C0G520110913, (15.9.11).

Le Monde (AFP, Reuters), Paris, Sarkozy et Merkel pressent la Grèce de respecter ses engagements (Sarkozy and Merkel press Greece to respect its undertakings), 14.9.11. http://www.lemonde.fr/politique/article/2011/09/14/sarkozy-et-merkel-pressent-la-grece-de-respecter-ses-engagements_1572423_823448.html#xtor=EPR-32280229-[NL_Titresdujour]-20110915-[titres], (15.9.11).

Picture  G8-de

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