Greek debt troubles

Worries
over Greece’s swelling debt is dominating talks between European Union finance
ministers as the euro fell to a ten-day low against the dollar.

Greece
is trying to assure financial markets — and other EU governments — that it will
reduce debt with a programme of deep spending cuts and higher taxes.

It
is aiming to bring its massive deficit down to the EU limits intended to underpin
the stability of the euro.

EU
officials have stressed that Greece has to take action because its problems
were also a problem for the entire euro area.”

Greece’s
ability to manage its debt crisis is being called into question by markets,
which see a higher risk that the government could default or need to seek a
bailout — the first in the eurozone — from reluctant richer nations such as
Germany.

A
Greek default would trigger deeper problems for the currency union, highlighting
the failure of allowing each country to manage its own economy. At the very
least, a default would also raise borrowing costs for other indebted eurozone
governments.

Such
speculation has seen the euro tumble to $1.4336 on Monday, the lowest since 8
January and some relief for exporters who fear that the continued high value of
the currency has depressed demand for German cars and machine parts and French
luxury goods.

The
16 eurozone finance ministers met Monday to discuss their economy and
differences between how each state is faring.

The economic crisis
has exacerbated these divergences, with Spain’s jobless rate of 19.4 per cent
almost five times higher than the Netherlands’, at 3.9 per cent. Each country
is tackling the crisis in its own way. Some, like France, are borrowing heavily
to stoke demand, while others, like debt-laden Ireland, are shunning economic
stimulus for debt reduction.

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