Greece may leave euro, leaders admit

[Confidenshal Profile]

http://m.guardian.co.uk/business/2011/n ... pe=article


The G20 is planning to increase the crisis-fighting firepower of the International Monetary Fund after the first day of its summit was dominated by the first open admission from EU leaders that it might be necessary for Greece to leave the eurozone if the single currency is to survive.

George Osborne said there was a "real sense of urgency" on a day that saw an emergency interest rate cut from the European Central Bank, backtracking from Greece over a referendum on its bailout conditions, and a recognition that the IMF may need extra resources to cope with a deteriorating global economy.

Amid distinct echoes of the financial market meltdown in the autumn of 2008, European leaders put massive pressure on the embattled government of Greek prime minister George Papandreou, forcing the abandonment of plans to hold a referendum and triggering a political showdown in Athens. Downing Street sources said "strong political pressure to sort itself out"had been put on Greece, while Barack Obama said it was time to "flesh out" Europe's bailout plan.

Share prices rose towards the end of the day as it became clear Papandreou had been forced to shelve his referendum plans and was seeking to put together a government of national unity that would agree to Europe's bailout conditions.

His hold on power looked increasingly tenuous last night after his decision to put the bailout terms to the Greek public was condemned by the finance minister, Evangelos Venizelos, and the opposition said the prime minister's resignationwas a precondition for a national unity government.

The summit host, Nicolas Sarkozy, took credit for changing sentiment in Greece, saying "the message addressed to the whole Greek political class by France and Germany" had focused minds. "Things are progressing," the French president added. "We have said clearly that we want Greece to stay in the euro, but we cannot wish for this if she does not want it herself. We have to defend the currency ... we cannot accept the breakup of the euro, that would mean the breakup of Europe."

He said the Greek opposition's decision to support the 27 October bailout package was an important development and "courageous". Sarkozy said Greece was an independent, free country and in no case could other countries interfere. But he added that his duty was to protect Europe and the euro.

Dealers said the mood had also improved after the ECB took action to halt Europe's slide towards recession, cutting itskey interest rate from 1.5% to 1.25%. In the summer, the ECB twice raised rates to head off inflationary pressure.

Mario Draghi, who took over as ECB president only this week, admitted: "What we are observing now is slow growth, heading towards a mild recession by year's end." Draghi expressed strong resistance to the ECB being used as a lender of last resort, insisting that it was not the remit of the central bank.

The G20 will now seek to shore up confidence both by beefing up the IMF's finances and by publishing an action plan for global growth that will includea call for Germany, China and Japan to expand their domestic economies and a commitment by Italy – seen as crucial in the fight to hold the euro together – to tackle its public finances.

Sarkozy piled the pressure on Italy'sprime minister Silvio Berlusconi on Thursday when he questioned whether plans announced in Rome to reduce the country's budget deficit would ever be implemented. Berlusconi arrived in Cannes with no new proposals for deficit reduction.

Borrowing costs on Italy's debts on Thursday rose to their highest level since the euro was founded, after Sarkozy and the German chancellor, Angela Merkel, warned Greece that a no vote in a referendum risked departure from the single currency. At one stage, yields on Italian 10-year bonds rose to 6.4% amid concern that a Greek exit would lead to other struggling countries leaving. News from Athens and the ECB rate cut saw yields slip back to 6.2% in late trading.

Osborne said it was essential for the plan agreed at last week's Brussels summit to be implemented, "including in Greece". It was the responsibility of the eurozone to show that there was an effective firewall. "The eurozone has taken important decision," the chancellor said. "The question is whether it is willing to implement those decisions. The message that we are getting here from the eurozone leaders in Cannes is that they are.

"The international community accepted the need to address the general economic situation. T he debate that has begun is about increasing the resources availableto the IMF."

As a member of the IMF, Britain will be called upon to increase its own contributions to the fund, but it is not clear how much the UK might have to provide. Ed Balls, the shadow chancellor, said Labour supported the principle of providing extra money to help support the global economy. However, he questioned whether the IMF should solve "a structural problem" in the eurozone.

"The only way to properly ensure market confidence in the eurozone is for the European Central Bank, alongside the bailout fund, to be given the political support it needs to act as lender of last resort when liquidity problems arise. That is the logic of the monetary union these 17 countries signed up to," Balls said.

The fragile sentiment in the markets was illustrated by Barclays chief executive Bob Diamond who, in an interview for the BBC's Today programme to be broadcast today, said it was conceivable a major European bank could go bust if the crisis got worse. "The question is, can it be managed … without creating systemic risk, which was the big issue around the Lehman Brothers collapse".

[Ridee Profile Website]

Fitch , S&P and the rest have warned that if the new package is signed ( in the coming days ) by the Greek government they will put us on D as Default

If that does not happen then the -50% haircut will do it

One way or the other Greece will go bankrupt in the coming months ( or days ) and the euro will be lost forever

The country is already sold entirely ( yes even the multi trillion "newly discovered" oil fields around Cyprus and Crete ) , special economic zones will be put ten in place with foreign armed forces around them , Kosovo style i guess and people will die in masses from starvation , we are already number one in suicides in the euro zone ( we had the lower rate 3 years back ) dog meat can be found in Athens , Chinese people in place know how to survive in urban conditions apparently and make some money while they are doing it i guess , young children are feinting in schools because they did not eat enough , but you know , every body is making sacrifices to "save" us , classic IMF stuff ...

Or the people will rise and kick the 4th Reich back to Germany ho knows

BTW Draghi already slashed the interest rate of the ECB to 1,25 this morning , he is after all a Goldman SuXX guy

[Icarus1 Profile]

you cant blame the reich for this one my friend at the minute zee germans are holding up the whole of europe

[Mrmcnuggets Profile]

Doooo it Greece. Pussy if you don't.

This is Sparta!!!!!!!!! Right?