Greek crisis worsens
Eurostat, the European statistics office, recently reported that the Greek budget deficit is even higher than previously believed and, as a result, Greek 10-year bond yields shot up to almost 9 percent. For perspective, that鈥檚 nearly three times Germany鈥檚 rate.
This new exorbitantly high cost of refinancing Greece鈥檚 sovereign debt has forced the Greek government into a corner, and it鈥檚 now seeking to immediately activate the EU and the IMF rescue package.
As we鈥檝e discussed before, the Germans are still working out the constitutional details of providing help to Greece. However, at this point, the parties involved at least seem optimistic that the program can get started and bring some sense of stability back to the euro.
According to Associated Press:
鈥淧apandreou, saying market pressure threatened to derail the country鈥檚 economy, announced Friday he had asked Finance Minister George Papaconstantinou to make a formal request for the plan鈥檚 activation.
鈥淭he plan aims to cover Greece鈥檚 immediate borrowing needs so it can continue servicing its debt and avoid default. 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. 鈥楾he moment has come,鈥� Papandreou said, speaking from the remote Aegean island of Kastelorizo.
鈥溾�業t 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,鈥� he said. Papandreou said the markets had not responded positively to Greece鈥檚 austerity measures that were designed to pull the country鈥檚 disastrous finances into line.
鈥溾�楾oday, the situation in the markets threatens to deconstruct, not only the sacrifices of the Greek people, but also the smooth course of the economy,鈥� he said.鈥�
The euro reacted favorably to the announcement and emerged from a 10-month low on the news. Yet, the bailout remains messy and risky. Under the current program even other troubled nations like Spain and Portugal will have to chip in money to support Greece. This is despite the fact that bond yields in both of those countries are rising as well. The rescue package is intended to be the last eurozone bailout, but it could just as easily be the first step down a very slippery slope.
You can visit the to read more about how Greece is asking to launch the EU-IMF bailout.
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