Week Of Decision On Debt

• September 27th, 2011
• Posted by 7thmin

A week of decision has got under way in the campaign to quell crisis over state debt in Europe, centred on Greece.

DECISION-TIME COMING

Officials from the International Monetary Fund, the European Central Bank and European Union are conducting an audit in  Athens this week; probing the capacities and commitment of the country to carry through budget and administrative measures demanded by its EU partners.

Said a commentary in Le Monde, 26.9.11, the exercise would determine whether Greece could access EU guarantee funds, and avoid defaulting on debt coming due early next month.

Decision-time would be at a meeting of the Eurozone, the 17 EU countries using Euro currency, on Tuesday next week, 3.10.11.

GREECE AT THE CENTRE

Frantic activity on the part of the Greek leadership:

The country’s Finance Minister,  Evangélos Vénizélos, has told a gathering of European financiers it was definitely an international concern, not for Greece alone.

“Greece is not the scapegoat of the Euro area or the multilateral economy”, he said.

“It is an historical and proud country.”

The Prime Minister, George Papandreou (picture), restated (26.9.11) in Berlin, that his government would see though its austerity measures, towards recovering its capacity to borrow.

“Yes we can succeed”, he said.

“Greece has the potential; Europe has the potential.”

That’s against widespread estimates that the cancelling of government services and jobs will itself undermine any chance of growth, and so ability to pay.

Unending protest in the streets of Athens demonstrates the same lack of faith every week.

DEBT WRITE-OFF PLAN

It has all nourished the proposals for a write-off of Greece’s public debt, towards 50%, emerging from the IMF Ministerial meeting in  Washington last weekend.

Banks would be expected to participate in that, sustaining substantial losses, towards hopes for recovering the rest.

The move would be part of a package to include a massive increase in the allocation of funds to support Greece, under the Eurozone support system of member governments under pressure – the European Financial Stability Facility (EFSF).

The idea of the package would be to insulate Greece from further pressure from financial markets, and so prevent contagion of its crisis to other economies.

REACTIONS AND RESENTMENTS

The airing of the proposal alone, set off a recovery of share prices in Europe, around 2% on Monday.

One of those welcoming more action from Europe was President Barack Obama, who told an audience in California the European system was “scaring the world”.

Not yet going through with increasing, even quadrupling its commitments under the every-growing EFSF, the EU must still, this week, clinch the implementation of the existing special guarantee fund for Greece, agreed to last July.

That was ample enough: €109-billion (A$145-billion), see EUAustralia Online, “Eurozone Summit: New package for Greece”, 22.7.11.

“But the crisis over debt now shaking the whole region has become aggravated since the Summer, making it necessary to give more leverage to the EFSF”, said Le Monde.

“Among ideas being put forward would be a guarantee by the EFSF of loans made by investors, to buy the debts of countries under pressure.”

That may have to wait.

The July agreement is still making its way through national parliaments, where public resentment of ongoing commitments to a wounded member of the group, will have its most direct influence.

Reference

Le Monde (with AFP, Reuters), Paris, La zone euro veut renforcer son fonds de soutien à la Grèce, (The Eurozone wants to boost its support funds for Greece), 26.9.11. www.lemonde.fr, (27.9.11).

Pictures  G Papandreou – wikipedia

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