Friday, March 19, 2010

France and Germany in a spat over Greek debt crisis

First the headlines and news and then my comments. From BLOOMBERG/COM. Sarkozy Opposes IMF Loan to Greece, Widens Rift With Germany. By Helene Fouquet

"March 19 (Bloomberg) -- President Nicolas Sarkozy opposes Germany’s call for an International Monetary Fund loan to Greece, a French government official said, pitting the euro area’s biggest members against one another over a rescue plan.

The official, who declined to be named under government ground rules, said Sarkozy favored a European solution to help Greece and said the monetary union must act to restore investor confidence and shrink Greek borrowing costs.

“I want to be very clear: if it were necessary, the states of the euro zone would fulfill their commitments,” Sarkozy said in Paris March 7 after a meeting with Greek Prime Minister George Papandreou. “There can be no doubt in this regard.”

My Comment:

Seems to me France is correct here. The Euro agreements stated that there were certain obligations to be met when a State with the Euro zone had any financial problems. By having the IMF bail out Greece, rather than EU members, the ground rules will have been violated and that has tremendous implications for the Euro. This conflict of positions between France and Germany over how to solve the Greek crisis, is very important as it pits the 2 largest EU members against eachother. It is no secret that France and Germany have always had a difficult relationship at best since WWII and even before that. This makes this a very serious problem and will give a clue as to where the power of the EU resides. Sparks can fly here quickly and the situation can get out of control without much difficulty. Stay tuned!

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