Europe Grapples With Greek Debt, Euro Woes

The 16-nation eurozone is facing its biggest crisis since the common currency was created a decade ago. Markets now consider Greek debt so risky that ratings agency Standard and Poor's downgraded Greece's long- and short-term debt to junk status. Other indebted European economies, Portugal and Spain, have also been downgraded, though not as much. While Germany and France continue to work feverishly on a rescue package to Greece and the euro, some analysts say it could be too little, too late.

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To the 16-nation eurozone now facing its biggest crisis since the common currency was created a decade ago, markets now consider Greek debt so risky that the ratings agency, Standard & Poor's, downgraded Greece's long- and short-term debt to junk status. The struggling economies of Portugal and Spain were also downgraded, though not as severely. Germany and France continue to work feverishly on a rescue package to buttress Greece and the euro, but some analysts say it could be too little, too late.

Eleanor Beardsley reports from Berlin.

Unidentified Man: (Speaking in foreign language)

ELEANOR BEARDSLEY: Europe is reeling from the rash of bad financial news. German television and newspapers were full of reports about Greek debt. We fear for our money, read one newspaper headline. Thats because Germany is the largest contributor to a $40 billion European bailout plan being put in place by German Chancellor Angela Merkel and French President Nicolas Sarkozy. But as the crisis grows, opinion polls show Germans are increasingly opposed to paying for what many consider the overspending and bad accounting practices of some of their southern neighbors.

Mr. ARA LOSEVSKY(ph) (German Businessman): They live beyond their means.

BEARDSLEY: That's German businessman Ara Losevsky. He's having a glass of wine and a cigar at a sidewalk bar in a fashionable neighborhood of former East Berlin. Losevsky fears that if Europe rescues Greece, that won't be the end of the problem.

Mr. LOSEVSKY: The next countries are Spain, Portugal and so on. We have a lot of countries - they are very dangerous finance. And I think when we help one, we must help the other one too, and then it's a hole without bottom.

BEARDSLEY: Those fears that a spiraling Greek crisis could engulf other eurozone countries overshadowed meetings today between Angela Merkel and the heads of the International Monetary Fund and the European Central Bank.

Chancellor ANGELA MERKEL (Germany): (Speaking in foreign language)

BEARDSLEY: Speaking at a press conference, Merkel insisted that Germany would make its contribution to bailing Greece out of its financial crisis, but only if the Greek government agrees to new austerity measures in the next few days. Some of the changes include raising the retirement age to as high as 67 from around 62 and scrapping the system of two extra monthly salaries a year as bonuses.

(Soundbite of protestors)

BEARDSLEY: But austerity isn't going down well in Greece. Public sector workers went on strike in Athens, and dock workers picketed in Piraeus this week, completely blocking cruise ships full of tourists. Greek workers say they shouldnt bear the brunt of a crisis brought on by bankers and speculators.

Angel Gurria is the head of the Paris-based Organization for Economic Co-operation and Development, a sort of club of industrialized nations which is advising Greece. There's no time for the blame game, says Gurria. Europeans already made that mistake with the subprime mortgage crisis.

Mr. ANGEL GURRIA (Secretary-General, Organization for Economic Co-operation and Development): The subprime, it was an American, quote, unquote, "American problem," and it spread like Ebola. By the time you noticed you had it, you had to cut your leg off in order to preserve your life. It's not a question of who is to blame. The market is not waiting. The deterioration is very serious and the possibility of contagion is very, very dangerous indeed.

BEARDSLEY: Greece says it can't pay debts coming due May 19th without a combination of $60 billion in loans promised from fellow eurozone countries and the International Monetary Fund. European leaders have called for an emergency summit on May 10th to ready the funds for Greece, but Germany's portion must first be approved by the German parliament, and that won't be easy just ahead of crucial state elections on May 9th. Frank Schaeffler is a congressman for the Free Democrats, part of Merkel's governing coalition. He says he's not sure how he will vote yet, but bailout might not be the only solution.

Mr. FRANK SCHAEFFLER (Congressman, Free Democrats, Germany): (Through translator) I think it's time to tell Greece it would be good if they leave the eurozone, that they devalue their new currency and that they negotiate a debt moratorium with their creditors.

BEARDSLEY: Schaeffler says a default may in fact be the only way Greece can save itself and not drag the rest of the eurozone into the mess.

Eleanor Beardsley, NPR News, Berlin.

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