IMF pulls the plug on Greece as EU leaders fail to reach agreement on debt rescue plan

IMF pulls the plug on Greece as EU leaders fail to reach agreement on debt rescue plan

By: Peter Cooper, Arabian Money

— Posted Sunday, 23 October 2011

The International Monetary Fund dropped a bombshell on the EU leaders summit last night saying that it would not after all pay for a second Greek bailout, according to The Daily Telegraph. Senior sources said privately that the IMF has indicated that it will not be willing to bailout Greece any further.

Greek debts have topped $368 billion and the IMF is manouvering for a 60 per cent haircut for lenders to Greece. The IMF pulling the plug on the Greek bailout sends the whole crisis to a different level.

Bad relationship

At the same time reports from pre-summit meetings point to increasing acrimony between the leaders of Germany and France with stand-up rows more like a broken marriage than negotiations betwixt heads of state. The entente cordiale at the heart of the eurozone is clearly stretched to the limit.

If the leaders of Europe cannot decide what to do next then the financial markets are going to sort this out for them. They have patiently idled in a trading range waiting for a decisive pointer to the next direction, up or down. Gold and silver will follow the markets down but should bounce back quickly (click here).

As the ArabianMoney website has argued for many months it has never been clear to us exactly how the eurozone crisis could be satisfactorily resolved (click here). The main solution suggested by the US is for a repeat of the balance sheet expanding bailouts that have massively ramped up US debts and deficits since 2008 and done nothing to actually solve their problem of low growth and high unemployment.

The market ’solution’ is very different: bankrupt the bad banks, liquidate the banks, let stock markets crash and then the whole system will right itself at a lower level of debt. The problem of course is that for democratic politicians the collateral damage may be enormous, not the unemployment and public misery, rather then end of their political careers.

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via IMF pulls the plug on Greece as EU leaders fail to reach agreement on debt rescue plan –


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