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Greeks may go to IMF as Germans turn them away
But euro has a better day as markets see Greece more determined to get its act together
Greece's aggressive plans to cut its budget deficit appear to have failed to win over Germany to help alleviate its financial crisis. Instead the troubled eurozone state is preparing to turn to the IMF for assistance.
German Chancellor Merkel is ruling out turning a meeting today with Greek Prime Minister George Papandreou into a discussion of "aid commitments." Papandreou's meeting in Berlin is the first of several stops, including Paris and Berlin, aimed at building support.
But time is running out for Greece. Germany believes the country is "liquid till the end of March". The crunch will come when it seeks to refinance €22bn of debt.
Publicly at least, European officials are expressing confidence that Greece will be able to reduce its deficit through cuts. Olli Rehn, the EU's monetary affairs commissioner, said he had "a very strong sense of the determination and unity in the Greek government to reform the country".
The markets seem to agree. The euro rose slightly yesterday after weeks of downward pressure that has now triggered probes of illegal trading in both the US and Europe that some believe amounts to a conspiracy to destroy the euro.
Greek politicians in particular blame currency speculators for selling off the euro while simultaneously driving up the cost of insuring Greece's debt to record levels.
Last week the US Department of Justice sent letters to major hedge funds including SAC Capital Advisors, Greenlight Capital, Paulson & Co and Soros Fund Management that it had opened an investigation into funds that trade in euro contracts and ordered the firms not to destroy related trading records and e-mails.
A spokesman for Soros brushed the inquiries aside. "It has become commonplace to direct attention toward George Soros whenever currency markets are in the news."
But fear of the inquiry and subsequent regulation has caused funds betting against Greece to pull back and refocus their efforts on the eurozone as a whole.
However, the banking industry is unwilling to take the blame for Greece's mismanagement despite in some instances helping to keep the extent of its public sector deficits off the books.
As one hedge fund manager told the FT: "The problems of Greece are down to the appalling public finances, not evil hedge funds. What do the politicians want to do? Put a ban on markets falling?" ·
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Most people will not be able to read the Greek word on the riot shields of the police in the picture above. It is 'ASTU-NOMIA' and roughly translates as 'city-law'. And that is what is at stake here. The Greeks in the cities have been undermined by decades of rampant socialism, draining their taxes in return for ever-increasing benefits (for those who DON'T work), pensions, cushy public sector admin jobs, and health care, the crippliingly expensive Olympic games, subsidised public works, etc, etc. The businesses have make a profit to stay in business, but the public sector only ever spend a budget. So it is the private sector that powers everything. But of course, they are blamed at every turn for the ills of society - the banks being the current whipping boys. So the city-law is the last resort to control the misled and over-taxed populace, now the bread and circuses, bought with other peoples' money, have run out. But will the ASTUNOMIA be sufficient? I am guessing not. I think that they will have to bring in the EU riot police, the European Gendarmerie, trained at their base in Vincenza, Italy. They are paramilitary, and they won't go easy on the Greeks, they draw their troops from Italy, Spain, France...etc. They won't feel for the Greeks, but the Greeks will feel it.
The EU has no business rescuing the basket-case economy of a nation that despises the EU in any case, and only joined for what it could get out of it. Greece's veto of Macedonia's entrance application proves that Greece is a rogue member of the EU and should be kicked-out.