May 11, 2011
European leaders slowed debt-wracked Greece’s drive for extra aid, saying the Athens government must first make good on pledges to overhaul an economy mired in a three-year recession.
German Chancellor Angela Merkel, recalling her go-slow tactics when the debt crisis erupted, said Greece -- lamed by a general strike today -- needs to stay the budget-cutting course to win an increase in the 110 billion-euro ($158 billion) lifeline granted a year ago.
“We can offer solidarity only if Greece’s stability and eagerness to reform is proven,” Merkel told reporters in Berlin yesterday. “We can get out of this difficult situation only if we properly rebuild that foundation, not just help without Greece doing anything.”
Bonds of Greece, laboring under Europe’s highest borrowing costs, rallied yesterday on expectations that Merkel would consent to another loan program to prevent a Greek default that would roil the euro zone. The yield on the country’s two-year bond fell 43 basis points, the biggest decline in more than a week, to 25.18 percent.
“What you’re going to get is the idea of Greece getting funding now so it won’t have to go to the market in 2012,” Alan Ruskin, global head of Group of 10 foreign-exchange strategy at Deutsche Bank AG in New York, said on “Bloomberg Surveillance” with Tom Keene. “Eventually Greece has to restructure. It’s just a question of first ring-fencing all the potential losers.”
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