July 23, 2012

Has the IMF quit Greece?

Der Spiegel is reporting that the IMF is quietly telling its loan partners that no more money will be forthcoming for the recalcitrant Greek state which is continuing to not reach treaty-obligated cost-cutting targets. The outline of this story is that the IMF is waiting for the finishing touches on the ESM (European Stability Mechanism, a emergency fund of some €700 billion euros) before going public with this new position. (Story at business insider has more detail.)

On top of this claim about the IMF, comes the small scandal surrounding the remarks by German Economy Minister Philipp Rösler, leader of the Free Democratic Party (FDP) who is also a deputy chancellor.

Rösler is quoted in Der Spiegel as saying:

"If Greece no longer meets its requirements there can be no further payments ...For me, a Greek exit has long since lost its horrors."

Due to the deep recession in the Greek economy, an additional €10 and €50 billion beyond the existing €130 billion loan package ($157 billion) will be needed to maintain the Greek state's finances and bond payments.

As part of the jockeying by European politicians from all sides comes the news that credit rating agency Moody's has given a negative outlook on Germany's triple-A rating, directly linking the Greek situation to Germany's possible downgrade. A Greek default and exit is estimated to cost Germany alone some €133 billion in liabilities and immediate losses.


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