Tuesday, February 16, 2010

Greece on the Brink

Eurogroup chairman of eurozone finance ministers, Jean-Claude Juncker, said Deutschlandfunk German radio from Brussels:
Greece must know that taxpayers in Germany, Belgium, the Netherlands and Luxembourg aren’t ready to correct the failings of Greek budgetary policy... [Greece]should focus on expenditure cuts, for example cutting current capital expenditure ... but also include revenue-increasing measures.
FT put things succinctly:
His statement made clear that European Union policymakers had turned a deaf ear to Greece’s appeals to switch the emphasis from new austerity measures to spelling out a rescue plan that would calm market fears of a Greek default.
Meanwhile, according to FT, George Papandreou, Greece’s premier, warned his EU partners at a summit last week that his government would risk political destruction if it were to ask people to accept more belt-tightening after they had been led to believe that the EU authorities had endorsed its plan.

Given these diametric positions, a Greek default appears to be a very possible outcome. The question now becomes, How will this impact the other PIIGS? Contagion could very well mean the end of the EuroZone, or at least a shrinkage.

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