Tuesday, 6 April 2010

Is the EU safety net helping Greece?
The interest paid by Greece to finance its debt continues to rise, despite a European Union credit safety net announced on March 25. Today, the Financial Times reports, its spread with the Germand bond rose to four percentage points, the highest ever. Greece reached a peak interest rate of 7.16 percent on its ten-year bond. The FT also reports that Eurostat will report a slightly higher-than-predicted Greek deficit of over 13 percent for 2009, further undermining the government's credibility. Greece has covered its borrowing requirements for April, but needs another 10bn euros in May. It may seek to raise that through a bond issue to US investors, says the FT.

Financial commentators have pointed out that the EU safety net is not reassuring to investors, because a) it does not reduce Greece's cost of borrowing but insists on roughly market rates, and b) is not activated until Greece has been rejected by markets, and even then only with unanimous eurozone approval.
Record highs: http://www.ft.com/cms/s/0/2403d946-41a5-11df-865a-00144feabdc0.html
US sale: http://www.ft.com/cms/s/0/5427bfe4-40f0-11df-94c2-00144feabdc0.html
NYT blog by Paul Taylor: http://www.nytimes.com/2010/04/06/business/global/06inside.html?scp=3&sq=Greece&st=cse

Comment: The real crisis is lack of demand
The FT's Martin Wolf argues that Germany is being dishonest about wanting smaller fiscal deficits from its EU partners, such as Greece. Were Greece, Spain, Portugal, Ireland and others to tighten their public finances, they would deliver such a shock to their private sectors that demand for German products would be as low in the European periphery as it is in Germany itself. The European Central Bank, Wolf argues, contributed to fiscal profligacy with its incentive interest rates, determined partly in order to stimulate demand on Germany's behalf. The argument is subversive, courageous and, if correct, truly worrying. If public and private economic discipline, hard work, environmental conscientiousness and an avoidance of acquiring stuff you do not need (the German way of life) lead your economic model to a dead end because it depends on spendthrift, materialistic societies, what hope is there for capitalism?

Video shows US killing of Reuters employees
A military video showing a US Apache helicopter firing upon and killing a Reuters photographer and driver in Iraq in 2007 has been released on the web. Reuters had been pressing unsuccessfully for a release of the video under the Freedom of Information Act.

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