Merkel Demands Faster Greek Rescue, Spain Downgraded

Wednesday, 28 Apr 2010 08:55 PM

 

  Comment  |
   Contact  |
  Print  
|  A   A  
  Copy Shortlink
BERLIN – German Chancellor Angela Merkel said on Wednesday Greece's international bailout must be accelerated for the sake of the entire euro zone, as the far bigger Spanish economy suffered a credit rating downgrade.

U.S. President Barack Obama joined expressions of concern about how a debt crisis which began in Greece might affect economies across Europe and beyond, tempering optimism from reports that the rescue would be much bigger than expected.

The euro fell to a year low and European stocks slid after Standard & Poor's cut Spain's credit rating.

Merkel, who has long held doubts about bailing out Athens due to strong opposition among German voters, expressed impatience about the pace of talks on the rescue.

"It's quite clear that the negotiations between the Greek government, the European Commission and the International Monetary Fund must be accelerated," she said in Berlin at a joint news conference with IMF chief Dominique Strauss-Kahn.

In European terms, Greece's economy is small and its financial problems are relatively modest. But politicians fear the crisis could spread to other economies, some of which are far larger and would be much more costly to help.

Shortly after Merkel spoke, S&P downgraded Spain's ratings one notch to AA from AA+, with a negative outlook, saying it expected the euro zone's fourth biggest economy to grow only slowly in the next few years.

Anxiety has spread well beyond the borders of Europe. The White House said Obama was worried about Greece's debt problems. He and Merkel discussed the importance of "timely support" for Greece in a telephone call on.

"This is something that is of great concern to the president and we're monitoring it very closely," White House spokesman Bill Burton told reporters on Air Force One. The U.S. Treasury Department and other agencies were "in close contact with folks in Europe about the issue," he added.

WEAK LINKS

Europe has a number of weak links, governments which are running huge budget deficits due to recession in the past two years and now have to borrow heavily to plug the gap.

Beyond Greece lie relatively small Portugal and Ireland, but then comes Spain and possibly even Italy -- the third biggest economy to use the common currency. All these need investors to remain confident in their ability to repay their debts.

European Economic Affairs Commissioner Olli Rehn, one of the architects of the aid, said Spain and Portugal knew they must take additional steps to rein in public debt and were doing so.

"The most important thing now is to stop, put out this bush fire in Greece before it spreads as a forest fire to the whole euro zone," he said.

Standard and Poor's slashed Greek debt to junk status on Tuesday and also downgraded Portugal, raising concerns the crisis may engulf other heavily indebted EU states.

Greece faces significant debt repayments next month, but economists said negotiators need to move much faster. "The longer they take to come up with concrete action, the worse this situation will get," said Martin Schwerdtfeger at Toronto-Dominion Bank in Canada.

Prime Minister George Papandreou reiterated the government's line that it was dealing with its problems and did not warrant such harsh treatment from markets.

"Interest rates on loans to Greece today are beyond any logic, and this reflects on the one hand a total loss of sobriety on the markets and on the other hand the power of speculative pressure exerted on our country," he said.

GLIMMER OF HOPE

Juergen Trittin, parliamentary leader for Germany's Green party, offered a glimmer of hope, quoting the IMF chief Strauss-Kahn as saying the package for Greece would be worth 100-120 billion euros ($133-160 billion) over three years.

Rehn told Finnish television Greece would need "tens of billions of euros" on top of the 45 billion pledged by the IMF and euro zone governments for this year. Strauss-Kahn declined to comment on Trittin's figure, saying it was too soon to give details as the rescue package was not yet finalized.

Markets, battered by the crisis this week, took some encouragement from the idea that the aid would be much bigger than originally envisaged.

The Spanish downgrade tempered any optimism, however, and some investors have questioned whether the euro currency zone can survive the crisis.

In a volatile session, the euro touched a one-year low against the dollar before rallying in later trade. The Greek/German 10-year government bond yield spread tightened to 792 basis points from an earlier record above 1,000 basis points.

Merkel's party risks defeat in a regional election in Germany on May 9 and has faced fierce pressure to cast Greece adrift despite warnings that could lead to market mayhem.

A Reuters poll on Wednesday showed that financial analysts saw a roughly one in three chance of Greece restructuring its debt some time in the next five years and an approximately one in 10 chance of it leaving the euro zone.

Greece's securities regulator banned short-selling in shares on the Athens bourse until June 28 after investors ditched Greek assets.

In Athens on Tuesday, about 1,500 private and public sector workers, students and anarchists marched to parliament chanting, "Out with the IMF and the European Union" in protest against austerity measures that could accompany the bailout.

© 2014 Thomson/Reuters. All rights reserved.

  Comment  |
   Contact  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

Cosby Said He Blocked 2005 Tabloid Story about Sex-Assault Accuser

Friday, 28 Nov 2014 12:42 PM

Comedian Bill Cosby struck a deal with the National Enquirer in 2005 to give the tabloid an exclusive interview about a  . . .

Trailer Unveiled for New Star Wars Film: 'The Force Awakens'

Friday, 28 Nov 2014 11:02 AM

The first teaser for J.J. Abrams' Star Wars: The Force Awakens has hit the web.
There has been an awakening - ha . . .

Black Friday Is Country's Favorite Gun-Buying Day

Friday, 28 Nov 2014 10:47 AM

Consumers in the market for purchasing firearms are among the millions of people swarming the stores on Black Friday to  . . .

Most Commented

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved