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Greek debt crisis: Europe feels shockwaves as bailout falters

Larry Elliott and Ian Traynor
London Guardian [1]
April 29, 2010

Fears that Britain could become embroiled in Europe’s deepening financial crisis intensified tonight after Spain had its debt downgraded, Portugal announced tougher austerity measures and Germany questioned whether beleaguered Greece should ever have been allowed to join monetary union.

With direct comparisons being drawn with the panic prompted by the collapse of Lehman Brothers in September 2008, European leaders promised to provide tens of billions of euros to Athens within the next three weeks. But Germany was still insisting on tougher economic reforms from Greece before approving a €100bn-€120bn (£89bn-£104bn) joint EU bailout, leading to fresh turbulence on Europe’s financial markets.

Angela Merkel, Germany’s chancellor, promised swift action to end the crisis, but said it was a mistake for Greece to have been allowed to join the single currency. “In 2000 we had a situation when we were confronted with the question of whether Greece should be able to join the eurozone,” she said. “It turned out that the decision [in favour] may not have been scrutinised closely enough.”

With the head of the Organisation for Economic Co-operation and Development, Angel Gurría, comparing the crisis to the ebola virus, the Conservatives and the Liberal Democrats warned of Greek-style problems for Britain unless swift action was taken to repair the public finances.

Full article here [1]