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More Turmoil Feared as Heat Kept on Greece
November 07, 2011

A customer receives euro notes in a counter at the Bank of Greece headquarters in Athens. Rumors circulated on Sunday that Greek Prime Minister George Papandreou was preparing to step down. (AP Photo/Thanassis Stavrakis) A customer receives euro notes in a counter at the Bank of Greece headquarters in Athens. Rumors circulated on Sunday that Greek Prime Minister George Papandreou was preparing to step down. (AP Photo/Thanassis Stavrakis)
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Brussels. With last week’s G-20 summit inconclusive, world markets promise to remain tense and turbulent this week as Euro zone finance ministers regroup to pressure Greece to initiate reforms in return for bailout aid.

The ministers meet in Brussels after a turbulent few days during which Greek Prime Minister George Papandreou barely survived a confidence vote in Athens and angered his European partners with a now defunct bid to hold a referendum on the bailout deal.

The regular meeting of finance ministers will be keenly watched, both in Europe and the world, since it could determine the fate of the next installment of Greece’s bailout package. Investors will be watching for details about the already-agreed bailout plans.

Ministers agreed two weeks ago to release eight billion euros ($11 billion) in loans, part of a 110-billion-euro bailout. Greek Finance Minister Evangelos Venizelos says it is needed by Dec. 15.

But the installment is now frozen until Athens endorses a new rescue package that was approved at a summit on Oct. 27 and is worth 230 billion euros in new loans and voluntary debt reductions by private lenders.

A breakthrough in Greece’s damaging political stalemate seemed increasingly likely on Sunday as the opposition leader said a deal on a unity government was possible if Papandreou resigned.

Despite rumors he was preparing to step down on Sunday, a government source said he would not step aside until the two main parties clinched a deal on a national unity administration, warning of a possible “power void.”

A second source, close to Papandreou’s socialist Pasok party, said: “I am sure he will resign. There is a possibility he does so today, but he first needs an agreement for a government.”

Papandreou was meeting with his cabinet late on Sunday night.

Finance ministers at today’s meeting will also discuss developments arising from Italian Prime Minister Silvio Berlusconi’s decision to allow officials from the International Monetary Fund to join the European Commission in monitoring his country’s implementation of the IMF-EU package to revive the Italian economy.

The ministers could also discuss other issues concerning the IMF. While last week’s G-20 summit agreed in principle to increase IMF funding, leaders failed to come up with a precise figure or timetable, kicking the issue down the road. The euro zone is hoping emerging powers such as China and Brazil will come to its rescue.

“Politically and economically there was little that the G-20 could have done to support the euro zone,” said Sony Kapoor, head of economics research organization Re-Define, noting that emerging powers have poverty to deal with at home.

“The euro area’s problems are entirely self-inflicted and will need to be solved from within.”

Rob Subbaraman, Nomura’s chief Asian economist based in Hong Kong, said sentiment in Asia was already being tested.

“Growth is cooling but it’s not collapsing,” Subbaraman said. But “Asia is very much integrated into the global economy, and if things deteriorate, we’ll get hit hard again.”


AFP, Reuters