Greece May Need Larger Aid Package
The euro fell near a one year low against the dollar on concerns that Greece may need a larger aid package and that Greece’s debt crisis could spread to other EU nations. Some currency experts expect the euro to fall below $1.30The euro pared gains after ECB President Jean Claude Trichet told reporters that the stability of the “euro zone is impacted” by the debt crisis “underscoring the need for action.” The euro traded at $1.3191 vs. the US dollar in New York and traded at 123.97 vs. the yen. Sebastien Galy of BNP Paribas SA stated, “There’s a tremendous amount of uncertainty at the moment. The euro should break below $1.30.” International Monetary Fund Managing Director Dominique Strauss-Kahn told German MP’s that Greece may need 120 billion Euros ($158 billion USD)in aid, much more than originally thought. European Union President Herman Van Rompuy said that he is confident that Greece will receive aid in time to service its debt. Rompuy said that negotiations between the EU, IMF and the ECB are ‘on track’ and repeated plans to call for an EU summit May 10th. Rompuy stated, “I would like to recall the strong commitment of the Euro area member states at the highest level to take the necessary steps to ensure financial stability of the Euro area as a whole.”
Government Responsibility
European Central Bank Executive Board member Juergen Stark said that EU governments need to ensure that financial troubles do not turn into a sovereign debt crisis similar to the one in Greece. In a speech in Berlin Stark warned, “The current trend in fiscal policies is simply not sustainable. … The onus is now on governments to ensure that the crisis that initially affected the financial sector, and subsequently the real economy, does not lead to a full-blown sovereign debt crisis. Averting it will require very ambitious and credible fiscal consolidation efforts. In fact, substantially stronger consolidation efforts than those conceived so far.”
Greece and Portugal Downgraded
On Tuesday Standard and Poor’s added to Greece’s problems and cut the nation’s rating to junk status and also downgraded Portugal’s rating by two notches to A-. Stark added that there is no comparison between the situations of Greece and Portugal. Stark stated, “I see no connection between Portugal and Greece, Greece is an individual case.” He said that the ECB’s record low rates are ‘appropriate’ and said that euro zone growth would be slower than growth in the US.
