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Friday, March 19, 2010

Who Will Pay Greece's Bills?

It appears there's a power struggle forming for who will NOT help Greece pay off its debts.

After weeks of backing a European rescue for the financially troubled Greece, Germany shifted course on Thursday, signaling that help should come from the International Monetary Fund rather than Greece’s neighbors.

Meanwhile, France would like to see the EU help to bailout Greece. Greece is hoping to get a break on the rate their bonds are currently paying. Their bonds currently have a premium of 6.25%, almost three percentage points higher than Britain and the U.S. A lot of this comes down to geopolitical ego. Greece doesn't want to approach the International Monetary Fund because that's generally reserved for the developing world and Greece wants to maintain the appearance that it's already developed.

So, no one wants to step. The whole affair has shown just how flawed and vulnerable the EU is. A few years back, some were claiming this would challenge the U.S. in terms of economic might. With Greece's problems, the Euro has simply gotten crushed. Thus, a massive weakness has been exposed. The EU is driven as much by its weakest link as by its strongest.

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