Monday, July 18, 2011

IMF says that huge Greek debt 'on knife edge

Greek debt is sustainable but it is, as we say, on a knife's edge," Poul Thomsen, deputy European director of the International Monetary Fund, told the Ethnos daily.
"Policies must be applied as planned, or the sustainability of the debt will be placed in doubt," he said.
"The programme will not continue to deliver the desired results without a real invigoration of structural reforms in the public sector to ensure a further deficit reduction, and without further reforms to get economic recovery going next year," Mr Thomsen said.
The EU and International Monetary Fund bailed out Athens last year with a package worth €110bn but the country remains in serious financial difficulty, with credit rating agencies having demoted Greece's bonds to junk status.
Athens' debt has exploded to over €350bn and market hostility has kept the struggling country from raising fresh loans, forcing European leaders to the drawing table once more for a new bailout.

Greece has more than 350bn euros of debt, and the IMF warned last week than it needs an additional 100bn euros in aid on top of last year's bail-out to avoid a default.

The eurozone members will hold a special summit on 21 July to discuss the debt crisis and provide fresh aid for Greece.

Mr Clegg told the BBC on Sunday that the crisis is "immensely serious".

"This has a direct impact on British jobs and the livelihood of people in this country," he said.

"I believe we should play an active role behind the scenes, because we are not a member of the euro, to help eurozone members make the reforms necessary to make a strong, prosperous eurozone in the future."

The Irish Republic and Portugal have had bail-outs since Greece received its aid package, and markets last week suggested they were worried that Italy will be the next.

On Friday, the European Banking Authority (EBA) said eight out of 90 European banks have failed stress tests designed to ensure they can withstand another financial crisis.

None of the tests included what would happen to the banks if Greece defaulted on its debt.

Five Spanish banks failed, as well as one in Austria and two in Greece.

The news came just as Italy's parliament approved a 70bn-euro austerity package.

According to the Bank for International Settlements, UK banks hold a relatively small $3.4bn (£2.1bn) worth of Greek sovereign debt, compared with banks in Germany, which hold $22.6bn,

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