Greece replaces finance minister

Stephen Beard Jun 17, 2011
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Greece replaces finance minister

Stephen Beard Jun 17, 2011
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JEREMY HOBSON: Today the prime minister of Greece reshuffled his cabinet in a desperate bid to keep the Greek government — and economy — afloat. Violent street protests and political opposition have prevented the government from passing major budget cuts needed to keep Greece from defaulting on its obligations to global banks.

Marketplace’s European Correspondent Stephen Beard is here live with the latest. Stephen — a new cabinet — and I hear increasing signs that Europe is going to send another check to Athens soon. Can we rest easy?

STEPHEN BEARD: No. In a word. A key European official says he’s confident that the EU and the IMF are going to agree this weekend to release the next chunk of the first bailout money — $17 billion. That will get the Greeks through the summer. They’ll pay their debts then until September when they’ll need more money. And the EU and the IMF are still insisting that the Greek government’s got to pass new austerity measures if they want a second bailout. So there seems little chance of them getting those measures through the parliament. So no, the crisis may have been kicked down the road, but the crisis certainly isn’t over.

HOBSON: And it’s a crisis for European banks as well. And I wonder, didn’t the Europeans just put their banks through stress tests to see if they can withstand big shocks like this?

BEARD: Yes, but the first set of stress tests were widely derided as sort of woolly and inadequate. So the EU ordered a fresh set. Now, these did not include the possibility of a sovereign default. So investors are now saying they’re completely irrelevant. These second tranche of tests have been delayed until July, possibly to build default into the test. But the authorities can’t talk about this. If they talk openly about the possibility of default, they may trigger another wave of speculation making a default even more likely.

HOBSON: Marketplace’s Stephen Beard.

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