Greek Prime Minister, George Papandreou is set to hold important discussions with the German Chancellor, Angela Merkel in order to discuss the country’s progress in deficit reduction plans. This meeting comes at a time when the eurozone is deciding whether or not to give Greece its latest amount of bailout money.
Leaders in the eurozone are attempting to agree on a solution to the debt crisis, however member states are still divided on how this can occur. Over the weekend, G20 leaders discussed the best options, but no plan had been set in motion afterwards. Apparently, ideas included a 50% write-down of the government debts for Greece or strengthening of European banks in order to absorb costs.
German Finance Minister Wolfgang Schaeuble expressed doubts last night on such plans. He said, We are giving it the tools so it can work if necessary. Then we will use it effectively, but we do not have the intention of boosting its volume.”
However, markets shortly afterwards experienced a little bit of growth, with Japan’s Nikkei closing up by 2.8% and Hong Kong’s Hang Seng increasing by 3%. The Kospi in South Korea increased by around 5%. Despite these increases, the market volatility currently seen throughout the markets mean that these gains are likely not to last long.
Not A Sign of Growth
Kazuhiro Takahashi at Dalwa Securities pointed out that these small rallies have occurred many times, with the results always temporary. He called it “markets coming up to air after days of brutal selling”.
The European Commission, the European Central Bank (ECB), and the International Monetary Fund (IMF), represent the “Troika” which has been reviewing the progress of Greece in deficit reduction. They will continue to meet with the country’s leaders this week and finish their review to discover how effective Greece has been in its austerity plans to cut debt levels.
They will have the deciding factor on releasing the latest amount of bailout funds to the struggling economy, which the Greek government will need in order to meet costs and pay bills. If the country is not given the income, it could default on its loans.