EU delays Greek bailout payment
The European Union will not make a decision about the next tranche of bailout money for Greece until October, weeks later than expected.
With Greece in danger of running out of money, agreement was supposed to have been reached this month, but it now looks as though the extra funds will not be made available until mid-October.
Splits develop
Splits have developed between member states over whether Greece has done enough to warrant more financial support. At a meeting of EU finance ministers in Poland, US Treasury Secretary Timothy Geithner’s call for European countries to take further action to deal with the debt crisis provoked anger in some quarters.
Mr Geithner said Europe needed to commit more money to the European financial stability facility, the fund set up to protect indebted states. But there was irritation that he appeared to be telling eurozone countries what to do. Austrian Finance Minister Maria Fekter said: “He conveyed dramatically that we need to commit money to avoid bringing the system into difficulty.
I found it peculiar … that they tell us what we should do. Austrian Finance Minister Maria Fekter
“I found it peculiar that even though the Americans have significantly worse fundamental data than the eurozone, that they tell us what we should do and when we make a suggestion … that they say no straight away.”
Jean-Claude Juncker, the chairman of eurozone finance ministers, said he was not prepared to discuss eurozone issues with countries that were not members of the single currency.”We are not discusing the expansion or increase of the EFSF with a non-member of the euro area.”
Belgian Finance Minister Didier Reynders said: “I’d like to hear how the United States will reduce its deficits … and its debts.”
‘Loose talk’
Mr Geithner had earlier warned Europe’s leaders to avoid “loose talk” about their divisions, saying: “What’s very damaging is not just seeing the divisiveness in the debate over strategy in Europe, but the ongoing conflict between countries and the (European) central bank.”
Greek default expected
A Reuters poll of 50 economists across Europe found that 65 per cent believe Greece will default on its debts, with half of them saying this will happen in the next year. Greece’s weak financial state is worrying Finland, which wants Athens to put up collateral in return for new loans.
“I think we are going to negotiate about it, but unfortunately I don’t see that we can find a solution tonight,” Finnish Finance Minister Jutta Urpilainen said. “I’m optimistic that we can find a solution that everybody can accept.”
Before heading to Poland for the meeting, Chancellor George Osborne warned his European colleagues that they had to act quickly to deal with the threat of a second credit crunch.
Time is short. Chancellor George Osborne
Mr Osborne told business leaders in Manchester that the banking crisis had turned into a debt crisis, with Britain playing a major part in accumulating this debt.
“We need a much better international response … at todays meeting I will be looking for my eurozone colleagues to send a clear signal that they truly recognise the gravity of the situation and are dealing with it. Time is short.”
Mr Osborne said Britain should not feel smug about Europe’s problems because it was not a member of the euro. “Britain is, of course, not in the euro, and I fought hard with others to keep us out. Let us take no relish at all from their problems, let’s have no schadenfreude. A successful euro is massively in our interest.”
But countries that were euro members had to accept “the remorseless logic” that a single currency meant more integration of tax policy.
Stock markets around the world rallied on Thursday when central banks in the US and Europe, including the Bank of England, announced that loans would be made available to support commercial banks.
‘Decade of low growth’
Former prime minister Gordon Brown, one of the architects of the architects of the 2008 bank bailout, said if action was not taken, Europe and the US faced a decade of low growth.
Mr Brown told a meeting of the World Economic Forum: “Unless there is global co-ordination … I foresee 10 years of low growth in Europe and America, I foresee very high levels of unemployment and I foresee a failure of co-ordination that will lead in the end to greater protectionism.”
Greece’s austerity drive has led to domestic protests because of the spending cuts the government is pushing through. “The intention is to meet the fiscal targets for this year and next year without delay, without exception and deviations,” Finance Minister Evangelos Venizelos said.