Friday, June 17, 2011

Greek Crisis Threatens World Economy - 17th June 2011

European leaders are discussing the economic and political turmoil in Greece amid fears that the country's crippling debt problems could spiral into a global crisis.

German Chancellor Angela Merkel and French President Nicolas Sarkozy are in Berlin discussing ways to ensure Greece can avert a sovereign debt default up to 340 billion euros (£298bn).

They have called for a quick deal on a second bailout for Greece worth 340 billion euros (£106bn) and insisted the European Union must go on aiding Greece.

But they gave no details about how private investors would contribute to the rescue plan - an issue that has split the eurozone and rattled financial markets.

Initial Greek market reaction was positive with bank shares rising by as much as 4% and the Athens stock market index up 2%.

But bond markets remain spooked by fears of a Greek default and most economists are sceptical that Greece can ever repay its debt mountain.

Meanwhile, European Council President Herman Van Rompuy is meeting Ireland's prime minister to discuss how to contain the "risk of contagion" from the Greek crisis.

Greece's Prime Minister George Papandreou is trying to push through an EU/IMF-backed five-year austerity package despite popular discontent, which has led to violent protests.

The bill must be passed by parliament this month if Greece is to continue receiving funds from its $157bn international bailout.

Athens needs its fellow eurozone members to stump up more cash to cover its financing, but there is little political and economic appeaLinkl among some European countries.

Without continued funding, Greece will default on its massive debts, which would have widespread ramifications for the global economy as well as the eurozone. Read More