Greek Rescue Plan to be Announced October 6 |
Greek finance minister Evangelos Venizelos announced that his country will do “everything possible” to reach target budget levels and to prevent Greece from being made a “scapegoat” for the global economic crisis.
Venizelos, who is also the deputy prime minister of Greece, promised that his country will always remain a member of the Euro zone. In order to allay investors’ fears, he said that the debt crisis will not lead to Greece leaving the currency union. “Greece wants this and will do this,” he said during an address in Washington today after taking part in the IMF and World Bank’s annual meetings. “We are ready to take the necessary measures and pay any political price” to improve the economy, the minister summed up. Greece still hasn’t met the conditions for the second tranche of an international emergency line of credit since questions remain about whether it can meet the conditions. DT Trading economists believe that Greece will begin restructuring its debt no earlier than December. In other words, we can expect a default on Greek obligations in one form or another before December.
Analysts from JP Morgan Chase & Co (JPM) are predicting a recession in the Euro zone economy in the fourth quarter. DT Trading analysts are betting that the ECB will lower interest rates at its next meeting in October. This admittedly doesn’t jibe with the tightened monetary policy that the ECB chose back in April of this year. Usually, central banks in developed countries, and the ECB in particular, raise interest rates in cycles which last for at least one year. It seems that the ECB’s decision to lower the rate will be made under pressure from circumstances and politicians on the other side of the Atlantic. After analyzing the possible actions that Washington politicians could take, DT Trading analysts have concluded that the US, being an obvious creditor of Europe (investment bank Goldman Sachs lending to Greece, etc.), is trying to convince European politicians to offset the US’s debt to European banks (two-year and five-year bonds being held in these banks’ accounts) and to the ECB at the expense of the assumed default on Greek obligations. These Greek obligations are in turn being held by American investment banks along with Goldman Sachs. Therefore, a lowering of the level of US debt may be possible in December, rather than another raising of the debt ceiling.
Europe may speed up the plan for restructuring the debts of troubled countries by creating a permanent fund for rescuing their cash-strapped economies. There are new signs emerging that they may intensify efforts to stop the sovereign debt crisis from worsening. According to the agenda of the meetings held yesterday in Washington, Euro zone finance ministers will try to determine this week what can be gained by creating the fund, known as the European Stability Mechanism, a year earlier than planned (European leaders had originally planned for it to be created in July 2013). Pressure on European politicians is mounting from all sides; British Treasury Chancellor George Osborne told journalists yesterday “the international community’s patience is coming to an end.” Let’s see how Europe will respond.
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