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More Time for Greece to Meet Budget-Cutting Goals?

Following release of its updated economic outlook earlier this week, International Monetary Fund (IMF) Managing Director Christine Lagarde today reiterated statements made yesterday that Greece should be given more time to meet its budget-cutting goals. The German Finance Minister today expressed concern that to do such a thing would weaken credibility - also read 'possibly create bad precedent.

Ms. Lagarde's continuing commentary is reported to come on the heels of the IMF having now concluded that "aggressive fiscal consolidation crimps growth more sharply than previously thought". Whatever 'previously thought' means, it hardly seems rocket science to conclude without much pencil-pushing that assuming all other things equal austerity measures will curb what otherwise would be GDP growth.

As you consider the financial markets generally, and your own trades and investments specifically, you might want to read Growth Warning: Top German Economists Say Greece Is Lost. That article reports that yesterday (Thursday) several "top" German economic institutes warned that:

  • "German growth is slowing";

  • Greece won't be able to "free itself from its debt burden"; and,

  • Greece "will need another (debt) haircut".

I believe that in the end Germany will:

  • decide what happens in the Eurozone and to the Euro; and,

  • like every other country act in what it believes to be its own best interest.

Topical Reference: Germany holds firm on Greece as IMF pressure mounts, from Reuters, Emily Kaiser, October 12, 2012 - reading time 2 minutes. Also see Growth Warning: Top German Economists Say Greece Is Lost, from Spiegel Online, October 12, 2012 - reading time 3 minutes.


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