Monday, 22 February 2010

The Greek deficit crisis in the media

Germany denies loan plans for Greece
A German finance ministry spokesman denied a report today that Germany was thinking of extending loans and loan guarantees to Greece worth 4-5 billion euros. The denial came on the tail of a report in Der Spiegel magazine that Greece's European partners were mulling over a 20-25 billion euro line of credit, citing German finance ministry sources.

'Greece seeks good interest rates, not bailout'  
Greek Prime Minister Yiorgos Papandreou wants political support and help from his European partners to borrow money at rates enjoyed by other, less-indebted countries, he recently told the BBC's Andrew Marr show, but denied that Greece was looking for a bailout.

"We don't have at this point a need for borrowing. Our borrowing needs are covered until mid-March. What we're saying is simply that we need the help so we can borrow at the same rate at other countries, not at the high rates that undermine the possibility for making the changes [to Greece's deficit]," Papandreou said.

ECB 'lacks imagination'
Deputy Prime Minister of Greece Theodoros Pangalos says that the European Central Bank lacks the imagination to support Greece in an interview to the Sunday edition of To Vima yesterday. That support, he says, could simply take the form of the bank buying Greek bond issues and pitting itself against hedge funds that drive interest rates up. "Just as they gamble, so should the ECB," says Pangalos. "A bank that bought Greek bonds with spreads at their highest point would make money. But they don't do it."

Pangalos ruled out the possibility of Greece electing a bailout from the International Monetary Fund, which would provide credit at cheaper rates than financial markets. "There is no possibility of that," he said. "We are in the European system. This is a strategic choice... But that doesn't mean we can't say to a European partner, 'Look here, I'm doing for you everything the IMF would ask me to do, and you won't perform for me a single anti-speculative gesture'."
Full interview:

The euro will face bigger tests than Greece 
 Financier and investor George Soros writes in today's Financial Times that a eurobond should be instituted for Greece and other eurozone countries whose debt matures. This is both in order to provide less expensive financing than is available in money markets, and in order to build the political unity on which monetary union is predicated.

"A fully fledged currency requires both a central bank and a Treasury," Soros writes. "The Treasury need not be used to tax citizens on an everyday basis but it needs to be available in times of crisis. When the financial system is in danger of collapsing, the central bank can provide liquidity, but only a Treasury can deal with problems of solvency. This is a well-known fact that should have been clear to everyone involved in the creation of the euro." 

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