Greece May Turn to IMF For Help
Global stocks fell on Thursday and the euro fell vs. the US dollar as concerns over Greece’s debt crisis persist. Dow Jones Newswire reported that an unnamed Greek official said that Greece is increasingly pessimistic about receiving aid from the European Union and may turn to the International Monetary Fund for help in solving the nation’s massive deficits. Greek Finance Minister George Papaconstantinou described the report as “ridiculous” and said that most options are still open. Ashraf Laidi of CMC Markets in London stated, “Three months have elapsed since the last credit downgrade of Greece and (there is) still no credible solution on how it will obtain 56 billion euros to meet its short-term debt obligations.” On Thursday Greek Prime Minister George Papandreou told the European Parliament that if Greece has to continue to borrow at high rates the recent budget cuts will not be sustainable. Papandreou also said that Greece will not default.
Germany Supports IMF Solution
Greece is counting on EU leaders to come up with some kind of mechanism to aid the indebted nation at the upcoming EU summit next week. Some EU countries, most notable Germany, are skittish about making any promises regarding aid to Greece. The chief financial spokesman for German Chancellor Angela Merkel’s party, the Christian Democratic Union, said that Greece should seek aid from the IMF. German lawmaker Michael Meister stated, “We have to think about who has the instruments to push for Greece to restore its capital-markets access. Nobody apart from the IMF has these instruments.” Although Greece would prefer an EU based solution the Athens government said it is keeping “all options open” as long as Greece is forced to borrow “at an unreasonably high interest rate.” Antje Praefcke of Commerzbank stated, “This just highlights the uncertainty surrounding the Greece issue. There seems to be no consensus in the euro zone, which is undermining confidence and that is what is weighing on the euro today.” A clear majority in the Dutch Parliament opposed EU aid to Greece and also thinks Greece should turn to the IMF for a solution to their debt problems.
Germany’s Hardball Stance
Some experts believe Germany will eventually soften its stance. Paul Hofheinz of the Lisbon Council, a Brussels research group, stated, “The Germans see the same thing that all of us see: that at the end of the day, they’re going to be part of the solution and it’s going to cost them something. When push comes to shove, I don’t think anyone doubts that the Germans will be part of this settlement. But why should they play easy?”
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