Crisis in Greece Leaves EU Future in Balance, Warns Angela Merkel
THE GUARDIAN: German leaders issue stark warnings and insist on punitive new regime for euro countries if monetary union is to survive

Europe was threatened with its gravest modern crisis tonight as Germany warned that the EU's future was on the line in the Greek emergency.

The spiralling tension over Greece's ballooning debts and Europe's first ever bailout of a country in the single currency has exposed fundamental questions about the EU and Germany's pivotal role as the union's biggest power.

In Berlin, where Chancellor Angela Merkel faces a groundswell of hostility to sending the Greeks a €22bn lifeline next week, leaders issued stark warnings about the prospects for the EU and insisted on a punitive new regime for the 16 euro countries if the monetary union is to survive.

The leaders of the eurozone's 16 nations are to assemble for an emergency summit on the Greek crisis in Brussels on Friday evening, with the mood bleak and the stakes high.

"Europe is at a crossroads," Merkel declared to the German parliament in Berlin today. "This is about no more and no less than the future of Europe and about Germany's future in Europe."

Her sombre tone was echoed by the opposition leader and former foreign minister, Frank-Walter Steinmeier, who said the Greek crisis presented the EU with its biggest challenge since the union was created in the 1950s. >>> Ian Traynor in Brussels | Wednesday, May 05, 2010

Angela Merkel: EU Future at Stake in Greek Crisis
THE TELEGRAPH: Angela Merkel, the German chancellor, has warned that the future of the Europe Union is at stake as the crisis over the Greek bailout pushed the euro to a 13-month low against the dollar.

Ms Merkel on Wednesday defended her decision to back the unpopular measure and called on fellow politicians to give their support.

"The future of Europe and the future of Germany within Europe is at stake," Ms Merkel told the parliament, which will vote on Friday on a package that would see Germany lend 22.4 billion euros (£19 billion) in taxpayers' money to Greece.

As Ms Merkel attempted to calm fears in Germany, the euro fell on Wednesday to $1.2937 - the lowest level for more than a year.

The slide was the latest sign of continued loss of investor confidence in European economies. >>> | Wednesday, May 05, 2010

Merkel Links Europe's Future to Greek Aid Plan
THE INDEPENDENT: An international rescue plan for debt-stricken Greece must succeed or other European countries may suffer the same fate, threatening the bloc's future, German Chancellor Angela Merkel said today.

In an impassioned speech to the Bundestag lower house of parliament, Merkel said Germany was now convinced of the need to bail out Greece and confident the Greek government would carry out the swingeing cuts it had pledged to tackle its deficit.

"We're at a fork in the road," Merkel told the assembled lawmakers. "This is about nothing less than the future of Europe - and with it the future of Germany in Europe."

"There is no alternative to the aid to be agreed for Greece if we want to secure the financial stability of the euro area."

"It must come to avoid a chain reaction in the European and international financial system and the risk of contagion of other euro member states," she added.

At the weekend, officials from the European Union and International Monetary Fund (IMF) revealed details of a 110-billion euro ($147 billion), three year aid package conditional on strict austerity measures that have led to mass protests in Greece.

"Europe today is looking to Germany. Without us, or against us, there cannot or will not be a decision that is economically sustainable," she said to a Bundestag session in which she was regularly interrupted by shouts from opposition lawmakers. >>> Reuters | Wednesday, May 05, 2010

Greece: Mob Madness
Watch Journeyman Pictures video here

Greece Announces Financial Bailout

Greece Erupts as Men from IMF Prepare to Wield Axe
THE SUNDAY TIMES: Anger is intensifying over cuts to be made as part of the EU deal to save the economy

MAY DAY protests in Greece turned violent yesterday as youths in gas masks and hoods set fire to vehicles, smashed shop fronts and threw molotov cocktails and rocks at police in an explosion of fury over austerity measures they claim will hurt only the poor.

Tourists were cut off from their hotels as thousands of communists, civil servants and private-sector workers converged on a main square in Athens to vent their rage at the European Union and the International Monetary Fund (IMF).

“No to the IMF’s junta,” they chanted as a youth in a black hood produced a hammer to try to smash windows of the luxury Grande Bretagne hotel.

Another painted anti-capitalist slogans on the facade, and demonstrators intervened to prevent him from spraying an Australian woman with paint as she tried to get back into the hotel. Japanese tourists stood taking photographs of the mayhem with mobile phones before being forced to retreat, coughing and sneezing, under a cloud of tear gas.

The violence came as negotiations were concluding between the socialist government of George Papandreou, the IMF and the EU over a multi-billion-euro rescue package for Greece. >>> Matthew Campbell in Athens | Sunday, May 02, 2010

Revolution from Greece's Ruins as Crisis Deepens
THE TELEGRAPH: As Greeks face changing their way of life, rioters in Athens clash with police at the start of a very long, painful summer for the country.



The week was already going badly enough for mild-mannered Greek prime minister George Papandreou. After months of insisting that his country would be able to claw its own way out of decades of mismanagement and corruption, his belated SOS to the International Monetary Fund (IMF) ensured that Greece's world famous ruins are now financial, not archaeological.

But then things got worse. Even as Mr Papandreou likened himself to Homer's great survivor, Odysseus, his country's fortunes were being sunk between a modern Scylla and Charybdis: German intransigence over a financial bailout on one side, and market jitters that downgraded Greek bonds to junk status on the other.

On Sunday, however, as the details of an economic life raft from the EU and IMF are due to be announced, Mr Papandreou will be forced to survey not simply the wreckage of the Greek economy, but the beginnings of "cultural revolution" that analysts say his homeland's crisis is set to unleash across the continent of Europe. >>> Harry de Quetteville and Paul Anast in Athens | Saturday, May 01, 2010

Athens’ Tense May Day

Rioting Greeks Throw Petrol Bombs at Police
THE TELEGRAPH: Greek protesters have clashed with riot police in Athens as anger about financial reform boils over.

Several hundred protesters waving red flags and wearing red bandannas confronted the police in the Greek capital on Saturday morning.

Two petrol bombs were hurled at the police lines, and armed police fired tear gas to dispel the crowd.

Thousands more demonstrators were due to gather in Athens for a rally called by trade unions and left-wing parties against government austerity plans.

Union leaders are hopeful that the May Day protests will highlight Greek resistance to the wage cuts, tax rises and pension reductions expected to be implemented.

But there were fears that violent anarchist and hard-left factions were intent on wreaking as much havoc as possible. >>> | Saturday, May 01, 2010

Greeks Face Tax, Pensions and Pay Misery in Austerity Plan
Photograph: Times Online
TIMES ONLINE: An increase in the retirement age from 53 to 67, a three-year wage freeze and cuts in public sector pay are understood to be among the austerity measures agreed to by the Greek Government in exchange for a €24 billion (£21 billion) rescue package.

The measures include severe cuts in Civil Service wages, with public servants losing their “13th and 14th” months’ salary and pension entitlements, a reduction of state benefits and tax increases on alcohol and tobacco to help cut the deficit. >>> Emily Ford | Friday, April 30, 2010

Fresh Hopes of Greek Aid Lift Euro
THE TELEGRAPH: The euro extended gains against the dollar on Friday as fresh hopes of aid for Greece eased fears about Athens' ability to reduce it massive deficit.



By mid-morning, the single currency was trading above $1.33, up from a one-year low against the dollar of $1.31 hit earlier in the week following downgrades on Greek, Portuguese and Spanish debt.

Stock markets in Germany and France also edged higher as investors took heart at speculation that talks on a rescue loan should be completed in the next few days after it seemed Germany had accepted it must act quickly to support a bail-out. >>> | Friday, April 30, 2010

Opinion: The Euro Zone Needs New Rules
The Parthenon in Athens: The Greek crisis has demonstrated the limitations of the Growth and Stability Pact. Photo: Spiegel Online International
SPIEGEL ONLINE INTERNATIONAL: The current Greek crisis has shown all too starkly the limits of the euro zone's sanction and support mechanisms. If the monetary union is to have a future, it needs new rules to keep members in line and bail them out if necessary.

Europe is in the worst crisis of the postwar era. For months, the governments of the European Union member states have proven to be incapable of developing a convincing solution for the serious debt problems of individual countries, as well as for the reduction of imbalances within the monetary union. Uncertainty among investors has grown in recent weeks, which is primarily attributable to the helplessness of political leaders, and only secondarily to the influence of speculators.

The banking crisis of the fall of 2008 demonstrated that bailout packages approved in response to market pressures fail to have the desired effect in the event of a massive crisis of confidence. At the time, it took the comprehensive approach of the Financial Market Stabilization Act to finally bring about stabilization in Germany. Today, the euro zone needs a common strategy that successfully combines sound public finances with solidarity between member states. On the one hand, the member states must be protected against the excesses of the financial markets. On the other hand, steps must be taken to ensure that the solidarity of member states doesn't undermine efforts to achieve fiscal consolidation in individual countries. In other words, what is needed is the appropriate balance of support and requirements. >>> Peter Bofinger* | Thursday, April 29, 2010

*Peter Bofinger has been a member of the government-appointed German Council of Economic Experts known colloquially here as the "Five Wise Men" since 2004. He is a professor of monetary policy and international economics at the University of Würzburg. His most recent book, published in German, is called "Ist der Markt noch zu retten?" ("Can the Market Still Be Saved?").

Edmund Conway – Greek Crisis: Athens to Ashes
THE TELEGRAPH: The Greek horror story should scare us all, says Edmund Conway. Its problems are not unique.

Anger bubbles over in Athens Photo: The Telegraph
It has all the ingredients for a perfect Hollywood sequel. The cliffhanger plot kicks off right where its predecessor ended; the cast is stellar, some characters from the original reprising their roles. But this time the stakes are even higher, the mood even tenser.

Greece is on the brink of bankruptcy. Based on almost any yardstick, markets are now betting that the government will default on its debt. At a staggering 18 per cent, the going rate to borrow for a mere two years is similar to the penal rates credit card companies charge their dodgiest customers. The government, International Monetary Fund and European Union have promised, vaguely, to hand over the necessary cash to help tide the country over, but to no avail.

It would be all the more shocking had it not happened before. But Greece's problems today are merely Lehman Brothers redux. This is Global Meltdown 2. Granted, this time it is a country, rather than a mere bank, that faces collapse; this time, the victim may really be too big to fail. But the pattern is eerily familiar: the money starts to run out; investors realise with horror that there is a real chance of failure; the politicians promise that they will stand behind the institution; in a last-gasp attempt to halt the disaster, they ban short-selling; eventually the law of gravity proves irresistible, investors stage an effective run on the banks and the end is nigh.

Faced with such a scenario, there are two options: confront the crisis, knowing you simply may not have the firepower to deal with it, or go running, screaming, for the hills. The head of the Organisation for Economic Co-operation and Development, Angel Gurria, has chosen the latter path, declaring that the contagion is spreading "like Ebola... when you realise you have it you have to cut your leg off in order to survive".

Before we lapse into amateur dramatics, however, let's establish the facts: the market for Greek government debt has effectively frozen, much as the money markets did worldwide in 2007 – the initial trigger point for the crisis. Its banking system, stacked high with those same government bonds, is effectively insolvent. The country had been due to return to investors on May 19 to raise money; if a bail-out cannot be agreed by then, Greece will have no option but to default. But even that deadline is increasingly academic: the country has fallen victim to a run, and as anyone who watched Northern Rock's demise knows, what follows is not usually pretty. How did it come to this? >>> Edmund Conway | Thursday, April 29, 2010

Warning for Britain as Financial Chaos Spreads to Spain
THE TELEGRAPH: Spain's economy was thrown into chaos on Thursday when its credit rating was cut, sharpening fears that Britain may suffer a similar fate.

The turmoil came just a day after Greece’s rating was cut, increasing concerns of a Europe-wide financial crisis.

The euro fell sharply and the interest rates European governments pay to borrow money jumped after Standard and Poor’s, a credit ratings agency, downgraded Spain.

Last night the government in Madrid appealed for calm, promising an “austerity programme” to cut spending.

But economists fear that events in Spain show that financial “contagion” is spreading from Greece, as investors are scared off investing in any European country with significant government deficits. >>> James Kirkup and Christopher Hope | Thursday, April 29, 2010

Britain Risks Greek-style Crisis, Warns Vince Cable
THE TELEGRAPH: Britain risks sliding into a Greek-style fiscal crisis unless the next government takes drastic action to cut borrowing, warned Vince Cable, the Liberal Democrat finance spokesman.

Greece is currently in talks with the IMF and the European Union on getting a €45bn bail-out package to prevent a sovereign default, and a slashing of its debt to junk status has sent global financial markets into a tailspin.

"The Greek position is much more serious but is a salutary warning that unless the next government gets seriously to grips with the deficit problems, as we're determined to do, we could have a serious problem," Mr Cable told Reuters Insider television. >>> | Wednesday, April 28, 2010

Greeks Absorb Reduced Credit Rating

Greek Debt Crisis Spreading 'Like Ebola' and Europe Must Act Now, OECD Warns
THE TELEGRAPH: The Greek debt crisis is spreading “like Ebola” and Europe must act now to protect the stability [of] the financial markets, according to the Organisation for Economic Co-operation and Development.

The Parthenon, Greece. Photograph: The Telegraph
“It’s not a question of the danger of contagion; contagion has already happened,” OECD secretary general Angel Gurria said.

“This is like Ebola. When you realise you have it you have to cut your leg off in order to survive,” he added, saying the crisis is "threatening the stability of the financial system".

Alistair Darling, the Chancellor, called for Eurozone countries to "urgently" agree a bail-out for Greece or risk a further decline in stock market confidence.

Mr Darling said it was "absolutely essential" that Greece's problems were sorted out "quickly, effectively and decisively", following a torrid 24 hours for world markets.

Asked on LBC Radio about the drop in the FTSE on Tuesday, the Chancellor said stock markets rise and fall but added: "That's my argument about the situation in Greece – we have got to make sure that it gets sorted out.

"But the primary responsibilities are for the other members of the euro group.

"They know that they have got to sort it out. They have promised money, and what I would say is they need to make that money available as soon as possible."

He added: "If we can sort out the problems in Greece quickly, then that will make people more confident."

The crisis in Greece sent stock markets and the euro reeling for a second day as fears grew that it would not be able pay its debts. >>> | Wednesday, April 28, 2010

ECB May Have to Turn to 'Nuclear Option' to Prevent Southern European Debt Collapse
THE TELEGRAPH: The European Central Bank may soon have to invoke emergency powers to prevent the disintegration of southern European bond markets, with ominous signs of investor flight from Spain and Italy.

Greece’s fortunes were dealt yet another blow as Standard & Poor’s slashed its credit rating to junk status - BB+ - the first time that has happened to a euro member since the single currency was created, pushing yields on 10-year Greek bonds up to a record 9.73pc.

The credit-rating agency also cut Portugal’s sovereign debt ratings by two notches to A-, as the swirling storm hit the country with full-force.

“We have gone past the point of no return,” said Jacques Cailloux, chief Europe economist at the Royal Bank of Scotland.“There is a complete loss of confidence. The bond markets are in disintegration and it is getting worse every day.

“The ECB has been side-lined in the Greek crisis so far but do you allow a bond crash in your region if you are the lender-of-last resort? They may have to act as contagion spreads to larger countries such as Italy. We started to see the first glimpse of that today.”

Mr Cailloux said the ECB should resort to its “nuclear option” of intervening directly in the markets to purchase government bonds.

This is prohibited in normal times under the EU Treaties but the bank can buy a wide range of assets under its “structural operations” mandate in times of systemic crisis, theoretically in unlimited quantities. >>> Ambrose Evans-Pritchard, International Business Editor | Tuesday, April 27, 2010

Crisis Spreads in Europe: Debt Downgrades in Portugal, Greece Sow Fear of Contagion; World Markets Hit
THE WALL STREET JOURNAL: Europe's hopes of containing Greece's credit crisis dimmed as the country's debt woes spread to Portugal, sparking a selloff in markets across the globe and testing the European Union's ability to protect its common currency.

The euro tumbled to its lowest point in a year against the dollar after Standard & Poor's Ratings Services cut Portugal's credit rating two notches and downgraded Greece's debt to "junk" territory, a first for a euro-zone member. The move is bound to worsen Greece's already dire fiscal situation and hamper a recovery. The news sent the bond yields in both countries soaring, a sign of distress.

The Dow Jones Industrial Average fell 213.04 points, or 1.9%, to 10991.99, suffering its worst decline in both point and percentage terms since Feb. 4. The pan-European Stoxx Europe 600 index tumbled 3.1%. As investors opted for the safety of bonds, the yield on Germany's 10-year benchmark was pushed down to 2.99%, moving below 3% for the first time in more than a year. Yields on U.S. Treasurys also dropped as investors bought.

Asian stock markets tumbled in early trading Wednesday on renewed worries about Greece's problems, with Japan's Nikkei 225 stock average shedding 2.8%.

The force of the market reaction to the downgrades suggests that the EU's fraught, months-long effort to stem Greece's debt crisis has all but failed. Portugal's stagnant economy has been viewed as among the weakest in the euro zone, although its deficit and debt levels aren't as high as Greece's. The debt rating downgrade on Tuesday, to A-minus from A-plus, fueled concerns that Portugal is on the same trajectory as its southern neighbor, despite its more solid fiscal position.

Greece's own turmoil was triggered in part by a similar ratings downgrade in December amid growing concerns about its debt. >>> Matthew Karnitschnig, Stephen Fidler and Tom Lauricella | Tuesday, April 27, 2010



TIMES ONLINE: ‘Greece infection’ spreads as stricken nation’s debt is rated junk: Greece plunged deeper into financial turmoil last night after its government bonds were rated as junk by financial markets. The Portuguese government debt also took a hammering after panic spread that a Mediterranean virus of insolvency and bad debts would infect the rest of Europe. >>> Carl Mortished and David Wighton | Wednesday, April 28, 2010

THE TELEGRAPH: Greece acts to stop speculators as debt crisis escalates: Greece has moved to stem panic in the country and stop speculators taking advantage of its escalating debt crisis. >>> Malcolm Moore in Shanghai | Wednesday, April 28, 2010

Financial Crisis Has Created Fertile Ground for the Far Right in Europe
TIMES ONLINE: The far Right is notching up astonishing ballot box victories across Europe. The financial crisis has created a sense of victimhood and a need, it seems, for parties that use nationalist rhetoric to criticise globalisation — and which are prepared to offer up scapegoats.

From Geert Wilders in the Netherlands to Umberto Bossi in northern Italy; from Hungary’s Viktor Orban to Jean-Marie Le Pen’s National Front in France, strong personalities are coming foward to exploit the mood. They use terms that were once monopolised by the Left — community, social cohesion, solidarity — but, overwhelmingly, they are concerned with the politics of fear; fear of the outsider.

The far-Right grouping Jobbik did well in the Hungarian elections because it appealled to an almost tribal reflex. Hungarians were worried that funds were running out, that the welfare system was beginning to crack, that there was not enough to go round. Jobbik blamed the Gypsies and won seats in parliament. And its rhetorical drum beat, drawn from centuries of central European anti-Semitism, suggested that a cosmopolitan global plot was making nonsense of the toil of honest Hungarians. >>> Roger Boyes: Commentary | Saturday, April 24, 2010

Euphoria Over Greek Rescue Fades As First Cracks Appear
THE TELEGRAPH: Euphoria over a joint EU-IMF rescue deal for Greece worth €45bn (£39.8bn) has given way to caution after angry reactions in Germany and continued concerns among bond investors that any bail-out merely delays the day of reckoning.

Euphoria over Greek rescue fades as first cracks appear. Photo collage: The Telegraph
Greek borrowing costs have fallen from post-EMU highs last week but still remain at stress levels. The yield spread on 10-year bonds over German Bunds dropped by 45 basis points to 6.75pc on Monday.

"This is a short-run fix, not a long-run solution," said David Owen at Jefferies Fixed Income. "At the end of the day, Greece has to carry out monumental fiscal tightening even as it slides deeper into recession. They risk chasing their tale. [sic]"

Mohamed El-Erian, head of the US bond fund Pimco, doused hopes that his firm would soon step in to buy Greek debt, saying the rescue package at rates near 5pc does not address the underlying "solvency challenges" facing the country.

The German taxpayers' union accused Chancellor Angela Merkel of caving into pressure, saying Germany would be left on the hook for huge liabilities.

Christoph Steegmans, spokesman for the finance ministry in Berlin, insisted that "nothing had changed" as a result of the weekend pledge by eurozone states for €30bn of loans. Help is "not automatic" and cannot be activated if any state objects. "The fact that the fire extinguisher has been primed says absolutely nothing about the probability of a fire," he said.

Frank Schäffler, a Free Democrat finance expert in Mrs Merkel's coalition, said the rescue deal is "clearly a subsidy" and violates the EU summit deal in March. "We're on very thin ice legally," he said, hinting at likely court challenges.

Professor Ekkehard Wenger from Würzburg University said the aid for Greece is "another step on the slippery slope downwards. All rational economic rules are being thrown out of the window. This is a bottomless pit."

"In the short-term this may calm things but within 10 years the eurozone is not going to exist any longer in its current form," he told Handelsblatt. >>> Ambrose Evans-Pritchard | Monday, April 12, 2010

An Aid Package in the Billions: Merkel's Bluff Called in Poker over Greece
Greek Prime Minister George Papandreou talks with German Chancellor Angela Merkel at an EU summit in Brussels on March 25. Photograph: Spiegel Online International
SPIEGEL ONLINE INTERNATIONAL: The European Union has hammered out a rescue plan for Greece. If Greece goes belly up, Germany will have to fork over 8 billion euros to the relief effort. The government doesn't want to hear about having "buckled." But there's no doubt that Angela Merkel's days as "Madame Non" are behind her.

Christopher Steegmans, spokesman for Chancellor Angela Merkel, decided that the best defense would be to go on the offensive. In a press conference held in Berlin on Monday, he declared that the state of the European Union's decision on whether to help Greece was "unchanged" -- lest anyone have a chance to claim the opposite beforehand. As he described it, discussions about the proposed €30 billion ($40.8 billion) rescue package for the crisis-plagued county were only about "hammering out technical details" but the time for talking about last resorts had yet to arrive. "The fact that the fire extinguisher is on the wall," he stated, "says absolutely nothing about the likelihood of its being used."

In other words: There's no reason to get excited. There's nothing to see here. Go on about your business, please.

But something about his hasty and unprompted justification elicited the feeling that something just wasn't right. Hadn't something happened? Hadn't Angela Merkel earned the moniker of "Madame Non" just a few weeks ago among EU heads of state and governments for being such a hard-nosed negotiator and blocking all moves to quickly provide the cash-strapped Greeks with some financial shots in the arm? And hasn't the conversation suddenly turned to very concrete sums running into the billions of euros that Berlin can use to give Athens a hand? 'Buckled?' >>> Philipp Wittrock | Monday, April 12, 2010

Euro Rallies On €30 Billion Greek Rescue
TIMES ONLINE: The euro surged to a one-month high and stock markets in Europe and Asia rallied today as traders welcomed a €30 billion (£26.5 billion) loans package for Greece, agreed by the currency's member countries to help the country tackle its debt crisis.

The euro surged to $1.3691 against the dollar, its highest level since mid-March, although concerns about the long-term nature of Greece's debt burden and worries about how the loans package would be implemented limited its gains.

The euro later dropped to $1.3574. Having fallen off sharply last week, it closed in New York on Friday at $1.3497.

"The euro is firmer as traders took heart from the Sunday announcement of the aid package for Greece,” said Daisuke Karakama, a currency analyst at Mizuho Corporate Bank. >>> Miles Costello, David Charter, Brussels | Monday, April 12, 2010