Germany says Greece may need more aid
Last Updated on Monday, 11 April 2011 09:52 Monday, 11 April 2011 09:30
There was a flickering sign that officials in Germany are beginning to grasp the concept that the debt burden placed on the peripheral countries might just be too much for them to handle and default is on the cards. German Finance Minister Wolfgang Schaeuble told reporters on Saturday that Greece may need more loans or a further cut in the interest rate on its bailout.
“We, also the Greek government and the Greek colleague, can’t say for good today whether that’s enough. Whether that is enough and how this continues will have to be monitored closely,” Schaeuble said.
The EU has continued to insist that Greece is on the right track and is putting in place a package for Portugal similar to the deals for Greece and Ireland - despite both countries suffocating under the weight of the 'bailouts'.
The ECB rate increase last month will only heap further pressure on the peripheral countries as they struggle with high unemployment, declines in consumer spending and lack of credit from their banks. But the rate increase suits Germany and France. A two speed europe is being created, a wealthy inner core protected from the fallout of their banks lending recklessly to peripheral banks, and a peripheral group of nations forced to shoulder the burden of private banking losses.
Stalwarts of Europe continued to insist that a default was not on the cards. Olli Rehn told media over the weekend that, "We do exclude restructuring. We have a solid plan. It is based on a very careful analysis of debt sustainability.”
ECB President Jean-Claude Trichet also said that Greece would be able to get through the crisis because budget cuts, tax increases and 50 billion euros in asset sales were being planned. He neglected to mention they were being planned on an economy who's debt burden is getting bigger by the hour.
Even as Portugal is mooted to receive an 80 billion euro bailout, the concept that Europe's path has done little to stem the crisis seems to be lost on the EU elite. Their bailout deal for Greece failed to stop the contagion. So did their bailout for Ireland. Their bailout for Portugal is trumpeted as stopping the contagion because they say 'Spain is different'. So was Ireland and so was Portugal.
Our prediction is that Spain will fall over the next six months. Unless the EU as a group recognises that losses cannot just be imposed on peripheral nations while the core countries suffer no consequences for their own banks reckless lending, the road to default is being paved with good intentions and bad decisions.
