Waiting for Europe’s “appropriate response”

October 13, 2011

Will the euro zone finally act decisively?

Investors are hoping for something big from European leaders at the EU summit on Oct. 23 and of the Group of 20 on Nov. 3. But they also know the 17 nations of the euro have a habit of offering delayed, half-hearted rescues that have cost them credibility.

So there’s been a lot of “urging” and “warning” in Brussels lately — politicians and central bankers have all been demanding Europe act as international alarm grows that its sovereign debt problems may drag the world into recession. “Further delays are only aggravating the situation,” said European Central Bank President Jean-Claude Trichet on Tuesday in his last appearance at the European Parliament, before he hands over the post to Mario Draghi on Nov. 1.

A day earlier, Germany’s Deputy Finance Minister, Joerg Asmussen, at the parliament to promote his candidacy to join the ECB‘s board, made his call, saying “cooperation has to be increased,” across the euro members, divided as to who should pay to rescue the heavily indebted nations of southern Europe. “I want to see a solution for debt sustainability for Greece,” Asmussen said. So do so many others, especially Greek Prime Minister George Papandreou, who in Brussels on Thursday said it was a “crucial element to make the necessary decisions concerning Greece.”

The European Roundtable of Industrialists, a business lobby of multinationals ranging from French car maker Renault to Spain’s Telefonica, has also come through Brussels to make its point. The group’s head, Leif Johansson, who is also chairman of Swedish phone maker Ericsson, warned that if European leaders fail to act, businesses could see a repeat of the liquidity freeze that followed the collapse of U.S. investment bank Lehman Brothers.

“The worst element of the 2008/2009 crisis was when liquidity froze,” he said. “The worst scenario we have right now is that that could happen again … and there is a real downside risk.” 

The Oct. 23 summit is being billed as a make-or-break event where Germany and France, the main powers in the euro zone, must come up with the solutions investors want. A meeting last Sunday between German Chancellor Angela Merkel and French President Nicholas Sarkozy, and their promise of a comprehensive strategy, suggests there will be a serious attempt to put forward a framework to try to resolve the crisis.

There could be a deal for a second bailout plan for Greece and an agreement on who pays what, including a 30 percent to 50 percent writedown in Greek private sector debt, EU officials say. The focus is also on the banks, who need more capital reserves as protection against losses in Greece.

And finally, there will likely an agreement to multiply the power of the bloc’s EFSF rescue fund beyond  its 440 billion euro ($600 billion) limit, which would not be enough to deal with Italy, the world’s fourth-largest borrower with its sovereign debt running to almost 2 trillion euros.

Unless France and Germany come up with something sooner, of course. But whatever they say they will do, it must convince investors. Trichet seemed to say it best. “We are the epicenter of a global crisis … we need an appropriate response.”

One comment

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Dear Sirs

Unfortunatelly, Greece cannot be saved with financial aid.
The problem with Greece is much more complicated.
What needed is a foreign intervention, like the one that happened in Iraq and Afganistan.
Only this time, west has to deal with a diferent kind of terrorism, but even more dangerous that the islamic kind of terror, because it can drag the whole world in a disaster.
A disaster worst that the 9/11 or the suicide bombers.
Greece is a very dangerous country, but because it is disguised as a modern one, it can fool every body at least for some time.
It can never be safe, as much as Irak and other Arab countries will never be democratic and civilised,unless very core changes happened in the cultural structure of these countries and change them from the roots.
So the problem in Greece can be solved only with foreign intervention.But not with the NATO Army this time.
Europe and Amerika should join forces and press the Greek goverment to give information from the Bank of Greece archives, about the people who deposit Greek government money to Switzerland and Lihtenstein,or do it by collaborating directly with these countries.
This money belongs to E.U. and was given as aid to Greece according to Mr. Jacques Delors plan when Greece joined the Europian Union.
So the corrupted Greek politicians (most of whom are still in the Greek political scene) and their associates and accompishers, deposited hundreds and hundres of billions in these two countries.
That money is the product of criminal actions against the people of Greece and Europe to say the least.
So an invastigation and legal action against them is JUSTIFIED and urgently needed to save people from unnecessary suffering,and the world from a dangerous situation.
Please believe me, there is no other way.
It may be painful for some, but I can assure you is THE ONLY SOLUTION.
We can see that everything else fails, the debt is to big to be served, and the damage is beyond repair,because we insist to ignore the criminal reasons that caused it.
So BE BRAVE AND SAVE THE WORLD,MR.SARKOZY,MRS MERKEL,MR.CAMERON and MR.OBAMA:

DO NOT HESITATE ANY LONGER, OPEN THE ACCOUNTS OF THE CRIMINAL GREEK POLITICIANS AND THEIR ACCOMPLISHER’S IN SWITZERLAND AND LIHTENSTEIN AND PUNISH THEM IF THEY CANNOT JUSTIFY THE LEGALITY OF THE FUNDS.
THESE FUNDS SHOULD BE RETURNED TO THE GREEK STATE, AND BE USED TO PAY THE DEBT THAT PLAGUES THE GREEK CITIZENS AND DESTROY UNITED EUROPE’S PROSPECTS AND PROSPERITY.

IF WE CANNOT DO JUSTICE TO THIS ISSUE, THEN LET US PREPARE FOR A VERY DARK FUTURE.
IS THAT WHAT WE WANT?
Thanks

G.J.

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