According to the director of the IMF, the Greek problem is isolated…
That is only his opinion though..
IMF Head: Greek Debt Problems Unlikely to Spread
Monday, 08 Mar 2010 07:32 AM
The crisis over Greece’s debt mountain is unlikely to spread to other euro zone countries with high levels of public debt, International Monetary Fund (IMF) managing director Dominique Strauss-Kahn said on Monday.
In an interview with Reuters in the Kenyan capital, Nairobi, Strauss-Kahn dismissed market speculation of potential default by other heavily indebted euro zone countries such as Portugal, Spain or Ireland as scare-mongering.
“You can add to the list all of the countries in the euro zone, to try to scare people about everything. I don’t think it will happen,” he said. “We have a problem with Greece. We don’t have a problem with Spain to date. The euro zone has to deal with the Greek problem. They are doing this. No one knows what’s going to happen tomorrow morning but there’s no reason why the spillover to Portugal or to Spain will take place.”
Separately, Strauss-Kahn, who is on a tour of Kenya, South Africa and Zambia to see how the poorest continent has bounced back from last year’s global economic crisis, said he was confident euro zone countries could handle the Greek debt maelstrom.
Greek Prime Minister George Papandreou said last week he might have to go to the IMF to meet debt obligations falling due in April if the European Union did not help with funds. It would be the first bailout in the history of the euro.
However, Strauss-Kahn said he did not think IMF involvement would be needed beyond the current levels of technical assistance offered and accepted by Athens.
“The euro zone wants to deal with the problem itself and I can understand this,” he said. “I think they can do it. I hope they will be able to do it, and we’re just here to help.”
“If some more is needed, we will be ready to do it, but so far I think that the Europeans will be able to deal with the problem.”
Papandreou received political support this week but no promise of any specific financial aid at talks with Chancellor Angela Merkel in Berlin and with Eurogroup chairman Jean-Claude Juncker in Luxembourg.
Greece’s public debts have mushroomed to 300 billion euros, well above its annual economic output, although Papandreou pledged that the country will not default.
French President Nicolas Sarkozy made clear he was ready to help if Greece’s financial situation were to deteriorate.
Athens needs to borrow 53 billion euros this year — at least 20 billion of it by the end of May — to repay existing debt and cover its huge budget deficit. It has enacted an austerity plan to drive the deficit down to 8.7 percent of GDP this year from 12.7 percent in 2009, although protests against the measures have fueled market skepticism about the government’s ability to push them through.
The crisis has threatened the credibility of the euro, and leaving Greece to fend for itself could unnerve markets further. Problems could then spread to other euro zone states such as Spain or Portugal.