Greece bailed out

[Razgovory]

By the way, the IMF has currently given loans the following European states Hungary, Ukraine, Iceland, Latvia, Belarus, Romania, Serbia, Bosnia-Herzegovina, Moldavia, Georgia. That's like half of Eastern Europe.

I approve of classifying Iceland as Eastern European.

[The Minsky Moment]

This is the kind of financing that only politicians and diplomats could dream up.  Strauss-Kahn must be out of his mind to agree to this.  Both the IMF and the EU are committing funds as part of an overall package, but there are separate loans with separate terms and conditions.  Hard to think of a better recipe for chaos.  Who is in charge in the event something goes wrong?  Within the EU part, what EU institution is going to service and monitor the loan?

[The Minsky Moment]

While all euro-region governments vowed to contribute, some would need parliamentary approval. Ireland, itself reeling from the financial crisis, would require "national legislation," Finance Minister Brian Lenihan said in an e-mailed statement.

This must be a joke.

[Zanza]

This is the kind of financing that only politicians and diplomats could dream up.  Strauss-Kahn must be out of his mind to agree to this.  Both the IMF and the EU are committing funds as part of an overall package, but there are separate loans with separate terms and conditions.  Hard to think of a better recipe for chaos.  Who is in charge in the event something goes wrong?  Within the EU part, what EU institution is going to service and monitor the loan?

I haven't read anything about it, but there is the European Investment Bank. As far as I can tell it's exactly the kind of institution to handle stuff like this.

[Zanza]

While all euro-region governments vowed to contribute, some would need parliamentary approval. Ireland, itself reeling from the financial crisis, would require "national legislation," Finance Minister Brian Lenihan said in an e-mailed statement.

This must be a joke.

Yes, that doesn't make any sense. Does Greece pay its share as well?

[Tamas]

So there will have to be a national vote in Ireland before the greeks can get their loans?

Stockmarkets will crumble the moment this becomes official.

[The Minsky Moment]

I haven't read anything about it, but there is the European Investment Bank. As far as I can tell it's exactly the kind of institution to handle stuff like this.

Will the individual states make their loans and then simply walk away and let the EIB handle all the details, come what may?  Does not seem likely.
The problem is that the EU has an institutional vacuum for this sort of program.  No EU level institution has either the funding or the authority and the Council (as the body bringing together the individual states who do have the funding and authority) does not have the bureaucracy or expertise to manage it. 

Thus, the logical thing would be a plain vanilla IMF program, but that would have the side effect of exposing the lacunae in the EU's incomplete financial infrastructure, forcing uncomfortable questions to be asked. 

[Cerr]

So there will have to be a national vote in Ireland before the greeks can get their loans?

Stockmarkets will crumble the moment this becomes official.

I think the national legislation just means that the legislation needs to be passed through the Irish parliament. I'm fairly sure a referendum wouldn't be needed.

[Zanza]

Will the individual states make their loans and then simply walk away and let the EIB handle all the details, come what may?  Does not seem likely.
The problem is that the EU has an institutional vacuum for this sort of program.  No EU level institution has either the funding or the authority and the Council (as the body bringing together the individual states who do have the funding and authority) does not have the bureaucracy or expertise to manage it.

They'll just make it up as they go along. That's how the EU works. 

[Duque de Bragança]

This is the kind of financing that only politicians and diplomats could dream up.  Strauss-Kahn must be out of his mind to agree to this.

Election year 2012 in France? 

[Savonarola]

Is Greece too big to fail?

Greece requests financial bailout 

On Thursday, tens of thousands of Greek civil servants staged a strike to protest over debt [AFP]

George Papandreou, the Greek prime minister, has asked for the activation of financial aid package, designed to help pull the euro zone member out of its debt crisis.

The request on Friday followed negotiations with European Union and International Monetary Fund officials over the details of the $60bn emergency rescue package.

Financial data published the previous day showed a worse-than-expected budget deficit of 13.6 per cent of gross domestic product (GDP).

"The moment has come," Papandreou said.

"It is a national and pressing necessity for us to formally ask our partners for the activation of the support mechanism, which we jointly created in the European Union."

Papandreou said the markets had not responded positively to Greece's austerity measures that were designed to pull the country's disastrous finances into line.

George Papaconstantinou, the Greek finance minister, said that the country expects to receive the first tranche of the $60.49bn (45bn euro) EU/IMF aid package before May 19.

"The request for aid removes uncertainty in the markets that Greece will not have funding," he said.

This is probably the largest multilateral rescue of a country ever attempted and comes after months of markets pushing Greek borrowing costs ever higher, undermining the country's efforts to cut its 300bn euro debt load.

Meanwhile, Angela Merkel, the German Chancellor, has said that there will be no aid for Greece until talks with the IMF are finished.

"The European Commission, the European Central Bank and the IMF would have to determine whether there is a situation whereby the stability of the euro as a whole makes it necessary to provide an aid programme for Greece," Merkel said.

Greece has covered its funding needs for this month, albeit at a high cost and needs to borrow less than 10 billion euros to cover next month when an 8.5 billion euro government bond comes due.

"Greece will go out to borrow from markets when conditions are appropriate," said Papaconstantinou, who will meet with IMF chief Dominique Strauss-Kahn in Washington this weekend.

Germany is furious that Greece has been able to borrow for years at rates close to German rates by virtue of being in the eurozone, but on misstated data which EU authorities let pass.

Germany remains central to the rescue, since it is reluctant to allow Greece steeply concessionary rates, of around 5.0 percent.

Axel Weber, Germany's central banker, warned that the risks of contagion from the Greek debt crisis had increased in recent weeks with many countries running "excessive budget deficits."

"The risk of contagion has increased over the last weeks and many countries are running excessive budget deficits," Weber said.

"Today, the situation in the markets threatens to deconstruct, not only the sacrifices of the Greek people, but also the smooth course of the economy," he said.

The rescue plan aims to cover Greece's immediate borrowing needs so it can continue servicing its debt and avoid default.

Papandreou was visiting the Aegean island of Kastellorizo on Friday before travelling to the United States for a meeting with IMF officials.

He is expected to meet Jean-Claude Trichet, the European central bank president, who is also attending the event in Washington.

The bailout would have to be reviewed by the European Union executive and the European central bank, and needs approval by all 15 of the other governments that use the euro.

'Painful process'

Al Jazeera's Barnaby Phillips, reporting from Athens, said it seems as if Greece has no other option.

"This has been a long, slow, painful process that has dragged on for four to five months but in the last two weeks the endgame has looked sadly inevitable.

"It is a humiliating moment for Greece, it's a traumatic moment for a country in the euro zone, it has to take the cheaper emergency money which is on offer whether it likes it or not," he said.

On Thursday, borrowing costs spiralled to alarming and unsustainable levels, pushing interest rates for Greek 10-year bonds to nearly nine per cent.

The spike came after after Moody's credit agency downgraded the country's sovereign rating and the European Union's statistics agency Eurostat revised Greece's budget deficit in 2009 to 13.6 per cent of GDP from 12.9 per cent, and said it could be further revised by up to 0.5 percentage points.

The level is more than four times the EU limit set for the 16 countries that use the euro, which has been badly hit by the Greek financial crisis.

Athens insisted its target of reducing its deficit by at least four percentage points in 2010 remained unchanged.

I can only assume that the caption is a mistake; even the Greeks wouldn't strike in order to be fired, right? 

[Valmy]

On Thursday, tens of thousands of Greek civil servants staged a strike to protest over debt

Wow.  Civil servants demanding the government slash expenses and pay its debts.  What noble patriots those Greeks are 

[Tamas]

On Thursday, tens of thousands of Greek civil servants staged a strike to protest over debt

Wow.  Civil servants demanding the government slash expenses and pay its debts.  What noble patriots those Greeks are 

I am pretty sure they want Teh Evöl Banks to pay the whole and not Teh People

[Palisadoes]

All this does is ensure that Greece doesn't default on it's debts this year. There's always next year, though...

The richer countries in the EU will of course suffer from the wealth distribution of the EU, and they will likely be doomed to this fate so long as failure-prone economies (like the PIIGS economies) are allowed to be members of the EU. The outrage in Germany over this is understandable.

Still though, there has been some good to this: the pro-Euro crowd have finally been proven wrong here!

[Iormlund]

That would probably have required very expensive bank bailouts, so it would not have been cheaper. When Lehman was allowed to go bankrupt that was in hindsight not such a brilliant idea.
And the damage it would do to the idea of European integration and solidarity not to help the Greeks in some way would be immeasurable.

Do you know that some (European) banks have heavy exposure to Greek debt--enough to sink them--or is that speculation?

In addition Swiss banks are very vulnerable to a Greek default.