Eurozone in verdere moeilijkheden na nieuwe val kredietwaardigheid Griekenland en Portugal (en)
The eurozone was plunged into further difficulty on Tuesday (27 April) as credit rating downgrades for both Greece and Portugal provided further evidence the economic contagion was rapidly spreading beyond the Hellenic Republic.
European share prices tumbled after rating agency Standard and Poor's cut Greece's credit rating to junk status, a first for a euro area country, with Reuters reporting that euro area leaders were preparing to hold a special summit on 10 May to activate an aid package for the embattled debt-ridden country.
"There are talks at the highest level, and 10 May is the first available date after the vote for activation in the Greek parliament on May 6 or 7," said a Spanish EU presidency spokesperson, reported the newswire.
The euro currency fell to its lowest level against the dollar for almost a year, as investors continued to worry over German intransigence in providing aid to Greece, and the possibility of a restructuring of Greek debt.
Speaking from Tokyo where he was participating in an EU-Japan summit, European Council President Herman Van Rompuy said negotiations between EU, IMF and Greek officials were progressing well.
"The negotiations are going on. They are well on track and there is no question about restructuring of the debt," he said, a view backed up by statements made by European Central Bank president Jean-Claude Trichet.
Bail-out size?
Despite the attempts to calm financial markets, concerns continued to grow that the money currently offered to Greece may not be enough. During a teleconference meeting earlier this month, euro area finance ministers promised to provide up to €30 billion in bilateral loans this year, with a further €10-15 expected to come from the IMF.
Officials in Athens and Washington indicated on Tuesday that the IMF was now in talks to increase its aid contribution by €10 billion, reports the Financial Times, amid fears the original figure would not meet Greek needs.
Athens is currently struggling under a €300 billion debt pile, with 19 May seen as a crucial date in the government's debt refinancing calendar.
On Tuesday Goldman Sachs said that rescuing the Greek economy could require a bail-out closer to €150 billion over the next three years, and warned this would be politically impossible for European leaders.
"On my numbers, a one-year fully funded programme needs to provide a minimum €50-55 billion; an 18-month programme will require some €75 billion, and a three-year programme a minimum €150 billion," wrote the bank's chief European economist, Erik Nielsen, in a note to investors.
"I think the latter number is out of reach even for the present political environment of generosity, so the debate is between €55 billion and €75 billion," he added.
Germany
Much of the debate continues to centre on Germany, where crucial regional elections in the North Rhine-Westphalia state on 9 May have been blamed for the mixed messages emanating out of Berlin.
Socialists in the European Parliament attacked what they perceive as Chancellor Angela Merkel's 'go-slow' policy on Tuesday. "The downgrading of Greece's sovereign credit rating to junk status is an indictment of Angela Merkel's 'policy of prevarication'," said the president of the Party of European Socialists, Poul Nyrup Rasmussen.
Analysts have also been critical of the apparent foot-dragging, despite assurances from Ms Merkel and her finance minister earlier this week that they are committed to preserving eurozone stability.
Polls suggest the transfer of bilateral aid to Greece is hugely unpopular with German citizens, with the tabloid Bild newspaper on Wednesday running headlines saying: "Fear for our money", "Greeks don't want to save" and "Bild gives Greeks their drachma back".
However, analysts following the regional campaign inside North Rhine-Westphalia (NWR) say the Greek aid issue is less of a concern to the region's voters than questions of employment and the economy in general.
The populous NWR state with 18 million inhabitants is seen as a crucial region for the country's political parties, with victory for Ms Merkel's Christian Democrats essential if she is to hold on to her majority in the Bundesrat, the country's upper parliamentary chamber.