Europe's debt woes may widen
By Christiaan Hetzner |
May 13, 2011, Friday
|
Print Edition
Print Edition
DESPITE bailouts for Greece, Ireland and Portugal, Europe's debt crisis could still spread to core eurozone countries and the emerging economies of eastern Europe, the International Monetary Fund warned yesterday.
The IMF said it stood ready to provide more aid to Greece if requested, though the country that triggered the sovereign debt crisis in 2009 still had plenty of untapped options for raising extra cash itself though privatization.
Government sources in Athens meanwhile said international inspectors checking on Greece's compliance with its EU/IMF rescue package had found problems and were pressing for deeper spending cuts to cover a revenue shortfall.
"Contagion to the core euro area, and then onwards to emerging Europe, remains a tangible downside risk," the IMF's latest economic report on Europe said.
Finance ministers of the 17-nation single currency area are set to pass a rescue plan of 78 billion euros (US$111 billion) for Portugal next Monday after Finland's prime minister-in-waiting clinched a deal to ensure parliamentary approval of the package.
But markets are concerned that Greece may never be able to pay back its 327 billion euro debt pile and will have to restructure, forcing losses on investors with severe consequences in the eurozone and beyond.
Asked whether there could be new aid package to help Greece work through its fiscal recovery program, the IMF's European department director, Antonio Borges, said the fund was open to the possibility.
"The Greeks have to take the initiative, and so far they have not approached us. The IMF stands ready (to provide additional support) as a matter of policy," he told reporters.
However, Athens also had the potential to raise funds by selling state assets, with the 50 billion euros mentioned as a possible estimate of revenues from a privatization program "probably less than 20 percent of all the assets the Greeks could privatize."
The semi-annual IMF report said peripheral members of the eurozone needed to make "unrelenting" reform efforts to overcome the debt crisis and prevent it spreading further.
It also urged the European Central Bank to tread carefully on further rises in interest rates after last month's first increase since 2007.
The IMF said it stood ready to provide more aid to Greece if requested, though the country that triggered the sovereign debt crisis in 2009 still had plenty of untapped options for raising extra cash itself though privatization.
Government sources in Athens meanwhile said international inspectors checking on Greece's compliance with its EU/IMF rescue package had found problems and were pressing for deeper spending cuts to cover a revenue shortfall.
"Contagion to the core euro area, and then onwards to emerging Europe, remains a tangible downside risk," the IMF's latest economic report on Europe said.
Finance ministers of the 17-nation single currency area are set to pass a rescue plan of 78 billion euros (US$111 billion) for Portugal next Monday after Finland's prime minister-in-waiting clinched a deal to ensure parliamentary approval of the package.
But markets are concerned that Greece may never be able to pay back its 327 billion euro debt pile and will have to restructure, forcing losses on investors with severe consequences in the eurozone and beyond.
Asked whether there could be new aid package to help Greece work through its fiscal recovery program, the IMF's European department director, Antonio Borges, said the fund was open to the possibility.
"The Greeks have to take the initiative, and so far they have not approached us. The IMF stands ready (to provide additional support) as a matter of policy," he told reporters.
However, Athens also had the potential to raise funds by selling state assets, with the 50 billion euros mentioned as a possible estimate of revenues from a privatization program "probably less than 20 percent of all the assets the Greeks could privatize."
The semi-annual IMF report said peripheral members of the eurozone needed to make "unrelenting" reform efforts to overcome the debt crisis and prevent it spreading further.
It also urged the European Central Bank to tread carefully on further rises in interest rates after last month's first increase since 2007.
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