Greek rescue frays as Irish crisis drags on
The eurozone bail-out for Greece has begun to unravel after Austria suspended aid contributions over failure to comply with the rescue terms, and Germany warned Athens that its patience was running out.
By Ambrose Evans-Pritchard
16 Nov 2010
The clash caught markets off-guard and heightened fears that Europe’s debt crisis may be escalating, with deep confusion over the Irish crisis as Dublin continues to resist EU pressure to request its own rescue.
Olli Rehn, the EU economics commissioner, said escalating rhetoric in Europe was turning dangerous. “I want to call on every responsible European to resist the centrifugal tendencies and existential alarmism.”
Swirling rumours hit eurozone bond markets, while bourses tumbled across the world. The FTSE 100 fell 2.4pc to 5681.9, and the Dow dropped over 200 points in early trading. The euro slid two cents to $1.3460 against the dollar as the US currency regained its safe-haven status.
Austria’s finance minister Josef Proll said he was “very critical” of Greece’s performance, saying Athens had failed to meet the tax revenue targets agreed under the EU Memorandum.
Credit default swaps on Greek debt rocketed 97 basis points to 950 as investors woke up to the awful possibility that the EU could turn its back on Athens, which will run out of money by mid-January without loans. A Greek default would trigger $300bn (£188bn) worth of CDS contracts.
A ‘Troika’ of EU-IMF inspectors is currently in Greece but has not indicated whether the next €6.5bn (£5.5bn) tranche will be approved. German influence is crucial, yet Greek premier George Papandreou courted fate on Monday when he accused Chancellor Angela Merkel of driving the weaker EMU states into bankruptcy by scaring investors with talk of “haircuts”.