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Germany steps in to save Greece and the euro
Details remain obscure but EU deal is close to stop Greece defaulting
The game of chicken European politicians and central bankers have been playing over Greek debt looks close to resolution with Greece likely to receive a rescue package led by France and Germany.
A German official said the steep decline in the euro and pressure on bond prices had forced Berlin to "take a significant step". The official added: "We've had to face up to the fact that what is now a Greek problem could turn into a European one."
Markets rose strongly on the news. No details of the terms have been released and some nations, led by the UK and Sweden, still believe that the IMF is in a better position to organise a bail-out.
And if Greece has capitulated, Portugal's prime minister Jose Socrates was still denying yesterday that his country needed any direct bail-out. "We don't need anything from Brussels," he said. "We know exactly what we will do. We don't need any help; we will solve our problems."
Over the past several months, fears that the entire euro system could come under attack have caused the currency to fall by more than nine per cent against the dollar. With currency speculators positioned to profit from a further drop, the emergence of a bail-out deal will force them to reverse their positions - often at considerable loss.
As word of a possible deal spread, the cost of insuring Greek debt using credit default swaps fell 19 per cent. The cost to insure Spanish, Portuguese and Italian debt fell by similar percentages, reflecting greater investor confidence.
With the crisis easing, analysts now say that, in view of the political and economic costs, it was unthinkable that the European Union would have ever allowed Greece to default. But European leaders were not about to bail-out Greece without first extracting promises for significant economic reform to prevent further market turmoil and uncertainty.
Speaking to the FT at the G7 meeting over the weekend, Tim Geithner, the US Treasury secretary, expressed confidence that a bailout within a European framework would work well. "I'm confident they can manage this, and manage it well." It seems he may have been right. ·
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The speculation here on both sides -- without having access to any details yet -- is rather bold and akin to the speculators betting against the Euro, but without the obvious risk involved.
Why don't we wait and find out about the conditions of the bail-out?
The EU can't bail Greece out (a violation of the Maastricht Treaty), so it must be the Euro-heavyweights, who have to step in, if Euro-Europe wants to avoid the messing-around of the IMF. I am really curious now how Greece will get herself off the hook once the conditions become public knowledge.
Ho, ho! The idea that the EU and the euro can save Greece...the Greeks and their great language and culture have survived nearly 3,500 years of assault by climate change, every type of pirate imaginable, the full might of the Persian army at the Battle of Marathon in 490BC, the Spartans, the Turks, the Black Death, British and German archaeologists, the communists, and they will survive the euro and the EU. They don't need bailing out, they are too tough to go under, they don't know how to lie down and give up. They just need to get the will-sapping socialist welfare state off their backs, they are entrepreneurs par excellence. There are kebab shops in Brussels where the respond to 'ya sas' with 'ya sou' (like 'vous' and 'tu'). Long live the Greeks, down with the EU.
So all of Europe has to step in to bail out Stavros and his inability to budget?? This will wipe the Euro off the currency markets - and all to save some fat Greek. Make the Greeks accept Macedonia as an EU member first - someone has to teach those kebab-munchers a lesson in basic politeness. Maybe some of them might even go out to work?
No amount of money poured into the black holes of the Greek, Portuguese and Italian economies will ultimately save the euro. As a political currency forced on a multitude of different economies it is fundamentally flawed and will inevitably fail.
Good riddance to the euro and the EU