If a new round of austerity measures in Greece fail, analysts tell Channel 4 News the country’s financial crisis could spread and leave a chunk of the world economy in ruins.
“Today the top priority is the survival of the nation” – the words of Greek Prime Minister George Papandreou, warning parliament of the need for a new round of austerity measures as part of the price for an international bailout.
Agreement could be reached by tomorrow with the International Monetary Fund on a package worth up to 120bn euros.
But with protesters already taking to the streets, there are serious doubts as to whether the Greek government can force through more spending cuts.
Greece – ‘under new management’
Over the last couple of weeks a large delegation from the IMF – the global lender of last resort – has been dictating terms in Athens.
On the table at the country’s finance ministry is a colossal loan of 120bn euros – enough to keep Greece going for three years. But the price for that loan is very high indeed.
Speaking to the Greek parliament and preparing the country for difficult times ahead, Mr Papandreou said: “Today, right now, the number one priority is the survival on the nation.”
He continued: “The measures we must take are needed for the protection of our country. For our survival, for our future, so we can stand firmly on our feet.”
Cuts package
Many Greeks are unhappy that Mr Papandreou’s government has already introduced a package spending cuts and tax rises. But the painful truth is that they are not enough.
Right now, the number one priority is the survival on the nation. George Papandreou, Greek Prime Minister
The money markets are not lending to Greece because it is considered too big a risk. That is why the IMF, along with other eurozone nations, have organised a bailout. But only if the government pushes through another round of austerity measures.
The package, to be unveiled this weekend, will include –
But if the country goes bust, the financial crisis could spread quickly.
Graham Turner, of GFC Economics, told Channel 4 News: “There is a conflict between, effectively, Greek workers and European banks.
“Many European banks hold Greek government debt. And if there is a default, then the cost of resolving this crisis passes from the Greek workers to the European banks, effectively.”
We are all interconnected. That is why bankers and politicians worldwide – even President Obama – are worried.
The concern is that the Greek budget deficit could leave a big chunk of the global economy in ruins.