Juncker Says Greek Austerity Measures ‘Ambitious and Credible’

Greece could face pressure to implement even more austerity measures when representatives of the EU, ECB and the IMF meet with the Athens government on Wednesday. The meeting was rescheduled due to disruptions in air travel caused by the massive ash cloud from an Icelandic volcano eruption. Eurogroup Chairman Jean-Claude Juncker told the Greek financial website Euro2day that 2010’s austerity measures are “pretty ambitious and look credible.” Juncker further stated, “During our talks with the troika (European Central Bank/European Commission/International Monetary Fund) on the Greek package, the possibility of new measures will be discussed.” The head of Greece’s employers’ association said he expects more cuts and newspapers predicted that tens of thousands of state contractors will find themselves without work. Most experts say that the IMF will demand further austerity measures as a condition for aid. Vassilis Korkidis, president of Greek Confederation of Trade, stated, “The IMF will certainly demand new measures for 2010, effectively proving that the current stability plan is not sufficient. The strategy of domestic deflation will plunge us further into recession.”

Greek Bond Spreads at Record Levels

Should the ash cloud continue to disrupt air travel a spokesman for the European Commission said that participants may hold a video conference. The IMF said the talks should last about fifteen days and any agreement reached would be finalized in a matter of days. On Monday Greek Finance Minister George Papaconstantinou said, “These talks are very important because they will make it possible for us to move very fast if the Greek government decides on the activation of the mechanism.” Juncker said the aid package provided by the EU and IMF would be on common terms. Juncker stated, “In no way will there be different terms from the euro zone and other ones from the IMF.” High borrowing costs are hampering Greece’s ability to finance its debt in a sustainable manner. On Monday the premium investors are demanding to hold Greek debt instead of German Bunds hit a record 482 basis points, up 40 points from Friday’s close. Juncker tried to reassure investors and stated, “What I must say is that the euro zone will assume its responsibilities. We have said it many times, there is European money when it becomes necessary.”

Borrowing Costs Driven by Speculation

Billionaire investor George Soros said that Greece’s high borrowing costs are being driven by speculation. On a news show Soros said that it will probably be necessary for Greece to tap the loan package. Soros stated, “I think it is necessary because the market interest rate is really far too high to make it possible for Greece to meet the conditions that are required of it.”

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