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« Agnico-Eagle Mines Limited: Update 04 May 2010 | Main | The Euro Is Screwed »

Greek Austerity for European Aid

Lifesaver 03 May 2010.jpg

The numbers are huge, the lenders are reluctant and the recipients are hostile, just how successful can this proposal be? We turn to the Wall Street Journal for the latest update on the rescue package for Greece:

Euro-zone countries and the International Monetary Fund, seeking to halt a widening European debt crisis that has threatened the stability of the euro, agreed to extend Greece an unprecedented €110 billion ($147 billion) rescue in return for Draconian budget cuts.

Under the three-year agreement announced here late Sunday, Greece would receive €80 billion in loans from other euro-zone members and €30 billion from the IMF. The planned rescue is the largest ever attempted by the IMF and a first for the 16-member euro zone. It still requires final approval from national governments.

So, this package still needs final approval from the individual governments who are expected to front up with the funds, well that could be easier said than done so we will wait and see just what shape the final package takes.

On the other side of this deal are the Greek people who as far as we can ascertain are none to pleased with the proposed austerity package which they will have to live with for years to come.

Greece's major unions, already vocal critics of the IMF, have vowed to take to the streets to protest the austerity measures. "We will start our new struggle with protests on Monday, Tuesday and the strike on Wednesday," said Spyros Papaspyros, president of the public-sector umbrella union ADEDY, referring to a general strike set for Wednesday. "We will fight for as long as it takes against this giant injustice."

However, the current Prime Minister is a supporter of this deal and wants the Greek people to embrace it.

The bailout removes the worry that Greece won't meet its immediate funding needs—€8.5 billion in borrowings due May 19. But it introduces fresh questions, among them whether the country can bear the harsh budget-cutting measures that are the price of the aid.

"We have no other choices and no time," Greek Prime Minister George Papandreou said in a televised speech on Sunday. He vowed that his government won't "allow the country to become bankrupt."

In conclusion the rescue package could be approved by this coming Friday, however, acceptance of it in Greece is another major hurdle to be overcome.

Politicians like it, but they think that big is beautiful and they are not the ones under the gun. We are still of the opinion that Greece should have backed out of the European currency and started again with their own currency, albeit a devalued one.

Watch this space, the fat lady isn't singing yet.

To read the article in full please click here.

Footnote: The US Dollar has opened brightly in Sydney, Australia, this morning and as we write it stands at 82.202, up 0.336 on the US Dollar Index and gold prices were steady at $1178.10/oz.

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