The eurozone has put off a decision on the bailout fund for Greece, after the news that Greece will be unable to meet the targets set by the “Troika” of the International Monetary Fund (IMF), the European Central Bank (ECB), and the European Commission (EC). The fact that Greece might not meet the deficit cuts required caused a sell-off on the stock market, meaning more volatility.
No Default Allowed
Eurogroup chairman Jean-Claud Juncker maintained that Greece would not be allowed a default. The money, numbering around eight billion euros, or £6.9 billion, must be released in mid-October.
At the Luxembourg meeting, the finance ministers also negotiated a deal to allow collateral for Finalnd, so that they have a security for their contribution to the bailout fund, The European Financial Stability Fund. Further bailouts would have been threatened without this agreement.
It was announced yesterday that their deficit in 2011 would be 8.5% of GDP, as opposed to 10.5% for 2010. The target from the EU and the IMF was 7.6%. This has come up short, the country claimed, due to the worsening recession. The IMF, along with the ECB and the EU have sent inspectors to Athens to take a look at Greece’s finances.
A Further Emergency Meeting
There will be another eurozone meeting held on October 13, where a decision will be made on the bailout funds, after waiting for the country to take additional steps to create a financial balance. According to Mr. Juncker, the country would then receive a “definite and final decision I the course of October.”
Without the bailout funds, Greece would be unable to pay its debts, would hurt European bank finances and pressure the eurozone. These could have wider implications for the global economy as well.
Investors fear that the crisis could cause a banking crisis if the country defaults, with emergency talks now being held over the future of Dexia, a Franco-Belgian bank. Ratings agency Moody’s announced yesterday that the bank’s credit rating would be reviewed due to its exposure to the Greek debt. The bank commented that it would “resolve structural problems” in order to deal with a Greek default.
Greece is sticking with unpopular austerity measures in order to try and reduce spending to help with the deficit.