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Europe approves $11B check for Greece

Oct. 22, 2011 at 9:04 AM   |   Comments

BRUSSELS, Oct. 22 (UPI) -- European finance leaders allowed Greece its second installment of a $160 billion loan meant to keep the country from going into default in November.

The $11 billion disbursement, however, which needs to be rubber-stamped by the International Monetary Fund, would not end the worries over the euro, which has been weakened by fears of a Greek default, The Daily Telegraph reported Saturday.

The finance leaders gathered in Brussels estimated Greece will require $350 billion in loans through 2020, which would test the political will of successful European countries where taxpayers are resentful for having to bailout Greece, which was viewed as overly-generous with benefits and fiscally irresponsible.

As Greece rises to the occasion by passing a series of austerity budget measures – the most recent passed this week with an estimated 125,000 protesters amassed in Athens – estimates of economic growth for the country have deteriorated sharply.

The latest estimate from the Greek government predicted a 5.8 percent contraction this year, far steeper than the previous forecast of a 3.5 percent contraction. This seriously derailed terms of the international loans, sending financial leaders back to the drawing board.

"We note the macroeconomic situation (in Greece) has deteriorated since the fourth review and that economic challenges remain large," finance leaders said in Friday's statement.

Markets on Friday reacted as if the second installment was a done deal. The DAX 30 in Germany soared 3.5 percent. The CAC 40 in France gained 2.8 percent, while the FTSE 100 index in Britain gained 1.9 percent.

On Wall Street, the blue-chip Dow Jones industrial average gained 2.3 percent.

At the two-day summit in Brussels, Saturday's agenda was also jam packed. Discussions were to center on recapitalizing European banks and expansion of the European Financial Stability Fund.

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