“It seems that the leading EU politicians hope that the Greek problems will resolve itself,” chief economist, Knut Anton Mork, at the Norwegian Handelsbanken says. “At the same time they do not want to experience the humiliation of the International Monetary Fund providing assistance to a country inside the euro zone, and Greek politicians are exploiting this fear by threatening to go to the IMF if they do not get enough help from its European brothers,” Mr. Mork writes in a note to clients.
“It is not going to be easy to win this game.”
Knut Anton Mork
This weekend 93.3 percent of Icelanders refused the controversial Icesave Agreement. Chief economist Knut Anton Mork at the Norwegian Handelsbanken ASA wonder if Greek voters will be inspired to ask their politicians to ignore their country’s international debt obligations.
He points out that even though the auction of the new Greek government bonds was oversubscribed, it was oversubscribed by investors who increasingly insist on a fixed income returns nearly three percentage points higher than the equivalent German bonds.
“First; this do not witnesses a particularly high level of confidence. And second; it raises the question of how long the Greek government will be able to continue to pay such high interest rates,” Mr. Mork writes in a note to clients, Monday.
The Greeks have now begun to realize the gravity of the problems and are starting to cut down on daily consumption.
“But the more they cut, the more they reduce state tax revenues. It is not going to be easy to win this game,” Mr. Mork writes.
At the moment there is little help to get from the other EU countries. The Greek Prime Minister George Papandreou received no promises of help from the German Federal Chancellor Angela Merkel on Friday.
“It seems that the leading EU politicians now just hopes that the problems will resolve by itself.”
“But at the same time they will by all means do not experience the humiliation of the International Monetary Fund to provide assistance to a country inside the euro zone.”
“And the Greek politicians are now exploiting this fear by threatening to go to the IMF if they do not get enough help from their European brothers.”
“We still believe that this is the best solution, but then again, we have no prestige at stake. We should not ignore the fact that a solution can exist without the IMF, but we are afraid that the fear in this case will be left so that new problems may still arise,” the Norwegian chief economist concludes.
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