Euro Zone on the Brink:Greek Debt skyrockets, Ireland May Seek Bailout and Portugal on Edge

Tuesday starts with a bang as Greece, Ireland and Portugal debt troubles increases and puts the Euro Zone near the breaking point.  The Greeks blame Germany for their current woes. Wall Street Journal:

Greece’s prime minister lashed out Monday at Germany—its chief euro-zone benefactor—for tough talk on government-debt defaults, making clear the widening strains inside the 16-member euro-zone as the currency bloc wrestles with a teeming sovereign-debt crisis.

Addressing reporters in Paris, George Papandreou said the Germans’ view—long-held, but recently reiterated—that private bondholders could suffer losses as part of a future bailout was intensifying government-debt woes.

The German position “created a spiral of higher interest rates for countries that seemed to be in a difficult position, such as Ireland or Portugal,” Mr. Papandreou said. He added that the spiral could “break backs” and “force economies toward bankruptcy.”

On Monday the Greek debt has increased Dramatically:

Greece said Monday it would miss a target to reduce its government deficit to 8.1% of gross domestic product this year, which was set after Greece took a €110 billion (€150 billion) bailout from euro-zone countries and the International Monetary Fund. (Germany put up €22 billion of that total.) As recently as last month, Greece said it would beat its target and report a deficit of 7.8%.

Instead, it now says the deficit is likely to be 9.4% this year, and that government debt would total 144% of GDP at the end of 2010. Citigroup economist Giada Giani said Greece’s debt could reach 165% of GDP in 2013. At the time of the bailout, Greece agreed that its 2010 debt would be 133%, rising to 150% in 2013.

Ireland, is facing pressure from EU to take a bailout from International Monetary Fund. From The Guardian:

An increasingly isolated Irish government was coming under mounting pressure tonight to seek an EU or International Monetary Fund bailout within 24 hours amid fears that contagion from its crippled banking sector might spread through the weaker eurozone countries.

Portugal, Spain, the European central bank and opposition parties urged Brian Cowen’s coalition government to remove the threat of a second crisis in six months by putting a firewall between Ireland and its 15 partners in the single currency.

With finance ministers from the eurozone due to hold emergency talks tomorrow night, financial markets were expecting Dublin to finalise negotiations with the EU over the terms of a deal to allow Ireland to rescue banks laid low by the collapse of the country’s construction boom.

“The Irish problem is spreading, but it could get more volatile,” said Ashok Shah, chief investment officer at London Capital, a fund management firm. “They have to get this bailout, they have a period of time before it gets impossible, before nasty things happen. The longer they leave it, the more difficult it will get.”

Meanwhile Portugal is teetering on the edge. From Montreal Gazette:

The euro is facing an unprecedented crisis after another country indicated on Monday night that it was at a “high risk” of requiring an international bail-out.Portugal became the latest European nation to admit it was on the brink of seeking help from Brussels after Ireland confirmed it had begun preliminary talks over its debt problems.

On Tuesday, EU finance minister will meet in Brussels to plan the next move to prevent contagion becoming a continental crisis:

European finance ministers will meet in Brussels on Tuesday to begin discussions over a new European stability plan that is expected to result in billions of pounds being offered to Ireland, Portugal and possibly even Spain.

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