Greece is bankrupt?: Rumors of EU BailoutSubmitted by SteveMT on Fri, 01/29/2010 - 16:40
What will be the crisis that brings the house of fiat currencies to the ground?
Greece, others, move to quash rumors about bailout
Buzz on bailout as Greece, EU try to quash rumors, point to planned reforms
By Matt Moore, AP Business Writer
Friday January 29, 2010, 2:23 pm EST
DAVOS, Switzerland (AP) -- Greek and European officials moved Friday to quash market buzz that Athens could find itself in too deep a financial hole to save itself, potentially saddling European governments with a costly bailout.
Prime Minister George Papandreou and the EU denied reports that European governments had engaged in bailout discussions, stressing that Greece itself must carry through on its plans to cut an alarming deficit.
"Any discussion of a 'Plan B' is simply not in our vocabulary," said Greek Finance Minister George Papaconstantinou at the World Economic Forum in Davos, Switzerland, where he and Papandreou have been giving assurances of their determination to carry through on a difficult plan to get spending under control in the next several years.
"We're not going to be drawn into this, we're not going to participate in it," Papaconstantinou said during a meeting with reporters. "We're going to do what needs to be done to reduce the deficit."
The Greek crisis represents a crucial test for the European Union since a default, or a bailout that prevents one, would be a serious blow to the credibility of the euro. Membership in the shared currency demands that governments keep their budgets under control.
Financial markets, it is feared, would respond to a default by selling off the bonds of other struggling euro governments. That would make it more costly for them to borrow money, deepening their predicament.
Spain, Portugal and Ireland also have large deficits, with Spain announcing Friday that its budget gap had swollen to 11.4 percent of gross domestic product from an earlier estimate of 9.4 percent.
Greece's deficit is at an estimated 12.7 percent in 2009 though the government has pledged to bring it below 3 percent by the end of 2012.
Greek officials have spent much of this week trying to douse speculation and rumors, and talking up Greece's plans for bringing its finances back in line with European Union guidelines.