A Sword of Damocles?
Earlier this week a Greek economist was just oozing confidence about “… the recovery of developed economies and the gradual upturn in world trade …”. He was hallucinating. In a virtual state of bankruptcy, Greece had to be bailed out by the European Union last Friday. The size of the rescue package was initially given as $ 145 billion, but today it was learned that the actual amount was $ 190 billion, and according to reports in the Business Times, suspicions are gaining strength that the rescue package might not defuse the potential threats to other struggling European economies.
1. “Moody’s puts Portugal on watch for debt rating cut”
“(LISBON) – Portugal, striving to avoid becoming the next victim of Europe’s debt crisis, was yesterday put on standby for a credit rating downgrade …
“Moody’s Investor Services warned it may downgrade Portugal’s debt rating in the next three months, a week after its rival Standard & Poor’s cut its rating and stoked market concerns that the crisis in Greece was spreading to other financially troubled countries in the euro zone …
“The Moody’s warning came after Portugal raised 500 million euros in its first bond issue since last week’s downgrade from S&P. That has generated fears that Portugal, like Greece, may have to get some sort of bailout from its partners in the euro zone and the International Monetary Fund.”
2. “Spain in midst of Greece contagion fears”
“(MADRID) – Spain emerged as a litmus test for the euro zone as stocks wavered yesterday and financial authorities moved desperately to dispel fears that the Greek debt crisis would infect other fragile economies …
“‘Bailout or not, contagion is definitely the talk of the town,’ said James Hughes, a London analyst.
“‘The contagion in Europe is a worry,’ said Royal bank of Scotland strategist Gregg Gibbs. ‘After getting a bigger bail-out and agreement on austerity measures with the Greek government, the market is still heading for the exit on euro zone periphery debt. The question has to be asked whether the European authorities can stop this from snowballing.'”
3. “Deadly blast fuels Greek bailout fears”
“(ATHENS) – Pushed to the brink of default, the Greek government agreed to slash spending and hike taxes in return for the $ 190 billion in loans from euro zone countries and the IMF…”
Slash spending? Hike taxes? Austerity? Here’s how jobless citizens reacted to that strategy:
“A fire-bomb attack on an Athens bank killed at least three people yesterday …”