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Big fat Greek bailout 'unlikely': Borg

AFP/The Local · 9 Dec 2009, 12:17

Published: 09 Dec 2009 12:17 GMT+01:00

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Borg also urged Athens to "apply serious budget policies."

In an interview with the German daily Handelsblatt, Borg was asked if European Union members might provide Greece with bilateral aid, and said: "Such an approach would have to be discussed very attentively within the eurozone."

Greece is a member of the 16-nation eurozone, but Sweden, which currently holds the rotating EU presidency, is not.

"There is no legal basis" for such aid, Borg added.

"The European treaty even explicitly forbids EU member states from transferring their debts to others, and we should stick to that."

Greek public finances are in terrible shape and the country's sovereign debt was downgraded on Tuesday by the international ratings agency Fitch and placed on negative watch by Standard & Poor's.

Borg pressed Athens to present "a multi-year consolidation plan and make drastic short term savings."

"The government there must begin to finally apply serious budget policies," he stressed.

A sudden and sharp revision of the country's public deficit is something "that simply should not happen in a well-organized country," the finance minister noted.

Greece's partners are very worried about the situation, Borg said, adding that it was not only the result of the global economic crisis.

"Greek public debt was already out of control before the crisis erupted," he noted.

Story continues below…

His remarks followed unusually strong comment from the head of the European Central Bank, Jean-Claude Trichet on Monday, saying that the state of Greek public finances was very difficult and that "courageous" corrective action was needed.

Some analysts have interpreted such recent comment from officials in EU institutions as revealing reluctance to appear ready to help Greece as a matter of course, unless Greece shows it is going to take aggressive action to reduce its public deficit.

AFP/The Local (news@thelocal.se)

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Your comments about this article

15:23 December 9, 2009 by Bensonradar
The reason Greece is nearly bankrupt is because of TAX EVASION. George Papaconstantinou, the new Greek Finance Minister, has ordered a review of the tax records of doctors in Kolonaki, a wealthy neighbourhood in Athens. Many of the doctors, bless them, have filed tax returns indicating that they earned just above the minimum wage of 20,000 euros [approx 210,039 Swedish Krona] per year. Greece suffers from widespread tax evasion, though is determined not to go to the IMF. Their problem is that when George Papandreou's party took over, the previous government had lied about the deficit. Instead of being six percent of GDP, it was 12.7 percent. The result is that Greek debt is downgraded by traders. The Greek government needs to revitalise their tax collection system, get people to pay correct taxes, and cut their large public sector.
17:27 December 9, 2009 by mkvgtired
Greece is a good example of what will happen to to other Western nations if we do not start to control our deficits. If the downgrade of Greece is causing such upset in the financial markets one can't even imagine what would happen if the United States, United Kingdom, Germany, or France's sovereign debt was downgraded. If that happened we would see a huge sell-off of financial assets globally. If these "risk free" investments are at risk one can only imagine how institutional investors will view "risky" assets such as equities, corporate bonds, and emerging market funds.

I wrote a blog entry several months ago citing figures from The Bank of Greece. If we do not change our economic course we all have a very dismal future to look forward to.

02:29 December 10, 2009 by Weekend_warrior
I was day trading National Bank of Greece (NYSE:NBG) some months ago, but have long since ceased. For that matter, I have pulled outta AIB and IRE too from Ireland respectively. Never bothered with Spain....

mkv...they'd never downgrade the sovereign debt of those nations for that very reason. Well, they would, but those are all highly productive nations who can service their debt. And Greece is laughable at best to be compared to Germany, France, or the USA.

excellent video on "MONEY AS DEBT" very informative
12:14 December 10, 2009 by krrodman
This is an interesting lesson for Sweden. Not to suggest that Sweden runs its economy in the same manner as the Greeks, but rather countries have used currency manipulation(Greece, Italy - USA) to pay for, and cover up for, ill-advised social and economic policies.

Once a country accepts the EURO, and the financial structure that come along with it, it can no longer devalue in order to cover for poor fiscal policy. In years past Greece would have devalued its currency and gone on with its irresponsible fiscal policies. Now it cannot because the Euro-Zone will not allow for it.

Note to Sweden - If you convert to the Euro, for better or worse, you will lose control of the ability to use your currency to compensate for social and fiscal irresponsibility.
18:45 December 10, 2009 by mkvgtired
I agree it is laughable now, but even an extremely productive nation can not cover a 10% of GDP annual deficit indefinitely. Hopefully the Asians were more persuasive than the Americans advising Obama. I realize a 10% of GDP deficit is not uncommon this year, but it does not seem like the decision makers in the US or UK have any interest in containing their budgets in the future.
03:33 December 13, 2009 by Davey-jo
If you don't fix Greece how can you expect to fix anything? The whole Euro currency must collapse. It's "one value for all countries" and if Greece is a bucket case then so is Germany. It's nonsense but that's what happens with a common currency. You get stuffed by the poorest performer. I guess Sweden and the UK will be shrugging their shoulders and saying "I told you so"
23:42 February 5, 2010 by rtaylormu
It is really important that countries control their national debt, and at this point it's not clear that Greece deserves any kind of bailout. And if they get one, all of the other European countries in debt will want one. This video elaborates really well on moral hazard of bailing out Greece:

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