Eyes on the IMF for aid in European debt crisis
Steve Chiotakis: As the G20 summit in France wraps up today, the mood among leaders was upbeat now that Greece scrapped its plan for a referendum on more big government cuts.
European leaders, along with President Obama, are also focusing on ways to stabilize Europe’s economy. And the International Monetary Fund has emerged as the latest possible savior.
The BBC’s Tanya Beckett is with us live from Cannes with the latest on that story. Hey Tanya.
Tanya Beckett: Hello there.
Chiotakis: We appreciate you being with us. Why are people pinning their hopes on the IMF now?
Beckett: The International Monetary Fund has a greater firepower than anything that could be drummed up within the eurozone — that’s one reason. Already, it was made very clear that this so-called “stability facility” that was being set up within the eurozone was lacking the firepower that was needed to push the markets back with their speculation against not just Greece, but now increasingly Italy.
Really, if you were to look for a military parallel, you would say that if you have a larger bomb than the person next to you, then they are unlikely to use their bomb. So if the smaller bomb is the markets, then you are in a stronger position. And that has never been the case over the last two years, there has been inadequate firepower committed to the problem of Greece.
So the IMF, if you adjust its role, and you adjust the contributions to it, you might just drum up the firepower to solve this problem. That’s why the IMF.
Chiotakis: I want to talk about Greece, and the options in tonight’s vote — there’s a confidence vote on the prime minister there, Papandreou. What are the ramifications, the economic ramifications under each result?
Beckett: If he wins, Papandreou will try to get opposition on board to stick to the austerity measures, to push them through. And therefore, you have a slightly smoother path, possibly.
If he loses, there will then be an election — and that will of course take a few weeks to organize and to push through. Any delay in the process is uncertainty, so that will be bad for the eurozone.
What has changed — very importantly — in the last days is that the German and the French leaders — Sarkozy of France and Merkel of Germany — have made it fairly clear that they are able now to consider the possibility that Greece will leave the eurozone. That is effectively a threat, now, that the Greek people are looking at: austerity or leave the eurozone.
Chiotakis: The BBC’s Tanya Beckett in Cannes. Tanya thanks.
Beckett: Thank you very much.
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