Merkel Will Not Absolve More Greek Debt

The German Chancellor stated that there had already been voluntary debt forgiveness.  Greek debt currently stands at 315 billion euros, about 175% of GDP. According to Open Europe, 60% of Greek debt is owed to the Eurozone, 10% to the IMF, 6% to ECB and the rest to other sources, including foreign banks.

Bond Yields Bubble Up in Greece

Bond yields in Greece bubbled ahead of the weekend's local government elections (10yr bond yield was 11.34%). Greece was bailed out in May by the EU and the IMF and today's bond yields are approaching those May highs when yields were over 12%. The EU and IMF are insisting wage and pension cuts and higher VAT and excise taxes.

Aide à la Grèce

The ECB (or "la BCE" in France) has agreed to bailout Greece.

Trapped in the Eurozone: Why Greece MUST reduce Fiscal Deficit

The IMF has asked Greece to focus on reducing its fiscal deficit. It can't ask it to change interest rates or exchange rates since Greece is in the Eurozone. There have been other situations when borrowers only had fiscal policy to rely on e.g. $30bn rescue of Brazil in 2002 (the indexing of Brazil's debt to USD or STIRs precluded the use of monetary policy). The bailout of Brazil was also in American interests: General Motors had invested a large amount in Brazil, Citigroup had $9.7bn in Brazilian loans.