Arab Today, arab today week of trials ahead for both greece and the euro
Last Updated : GMT 14:27:04
Arab Today, arab today
Arab Today, arab today

Week of trials ahead for both Greece and the euro

Arab Today, arab today

Arab Today, arab today Week of trials ahead for both Greece and the euro

Athens - AFP

Greece and the euro head for a week of trials from Monday as European and IMF experts return to Athens for a fiscal audit that will decide if the debt-hit country can escape default next month. EU heavyweight Germany will meanwhile hold a key vote Thursday on reforming a permanent European Union stability fund to enable it to engage in debt restructuring, a fallback the eurozone looks increasingly set to need. That\'s two days after Greek Prime Minister George Papandreou visits Berlin for talks with German Chancellor Angela Merkel as speculation mounts that a new EU rescue of Athens crafted in July will need to be revised. Additional commitment to a EU stability fund has been criticised by many in the ruling German coalition. But opposition parties are likely to support the move, and German Finance Minister Wolfgang Schaeuble says Berlin has no objections to speeding up its launch. \"If the (European Stability Mechanism) could be implemented earlier, then we would not object to that,\" Schaeuble said at a briefing at the International Monetary Fund and World Bank annual meetings in Washington. The IMF\'s policy board said over the weekend it had agreed to act decisively and collectively \"to restore confidence and financial stability, and rekindle global growth.\" The 27-nation European Union -- the Fund\'s largest shareholder -- meanwhile pledged to \"do whatever is necessary to resolve the euro-area sovereign debt crisis and ensure the financial stability of the euro-area as a whole and its member states,\" the board said. Greece\'s furtive dance with bankruptcy, only a year after a massive EU-IMF bailout loan of 110 billion euros ($149-billion) to restore its economy, has cast an ugly spotlight on other struggling EU economies, stripping the gleam off the euro. To make the country\'s huge debt viable in the long-term, a second EU rescue worth 159 billion euros was set up in July. Part of it involves private bank creditors accepting a 21 percent \"haircut\" or reduction in value of the debt they hold, to lower Greece\'s interest costs. But Athens\' continued woes has led to speculation that a 50-percent haircut will now be required to make a difference. Banks holding Greek debt are likely to need recapitalisation if forced to take losses of this magnitude. On Sunday, the French government denied a report that it plans to inject 10-15 billion euros in the country\'s leading banks. But a source close to the issue confirmed to AFP that high-level discussions have been held with the banks on the need to recapitalise. The European currency took another blow last week after credit rating agency Standard and Poor\'s dunked Italy\'s credit standing, a treatment until now dealt to laggards such as Greece, Ireland and Portugal who later took loan lifelines. The concern among markets is now that the eurozone faces a much bigger problem than just Greece, and that EU policymakers have responded to the crisis with their usual show of disunity instead of determination. An informal meeting in Poland in mid-September that could have calmed fears exposed instead the difference of opinion between Europeans and the United States on how to handle the issue. All of last week, calls came in from government and finance leaders -- including G20 members -- for eurozone leaders to move decisively and in unison to prevent Greece from defaulting and to shore up weak banks. Once again, Athens has ironically found itself underpinning Europe\'s recovery hopes. Greek Finance Minister Evangelos Venizelos was in Washington this weekend to present to the IMF a new round of austerity measures designed to show the government\'s determination, but also guaranteed to cause social unrest. The additional effort was demanded by the EU, the IMF and the European Central Bank, known as the \'troika\' in Greece, who threatened to withhold funds out of the original rescue loan. To make sure \'troika\' experts would return to complete an audit suspended three weeks ago, the government imposed a hugely controversial property tax, new pension cuts and temporary layoffs for 30,000 civil servants. Several union strikes are scheduled for next week along with a civil servant walkout on October 5 and a general strike on October 19. A poll published in opposition daily Eleftheros Typos on Sunday showed 48.5 percent of Greeks are unable to pay the additional taxes and a further nine percent, who have the necessary money, will refuse to cough up. Another poll in Kathimerini daily said 66 percent of respondents oppose a return to the drachma, though 60 percent say a Greek default is likely and 40 percent term the eurozone\'s future uncertain.  

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