No “Opa!” in Greece Anytime Soon

Published Thu, May 19th, 2011   Wall Street Daily Research

Angry scenes in Athens as Greek demonstrators clash with police as they protest over job cuts and wage reductions.

Tear gas was used as employees from various local government departments reacted to budget cuts

But even as their anger grew, elsewhere in Athens European Central Bank and IMF officials were calling for more stringent economic action.

IMF Mission Chief for Greece, Poul Thomsen said it was said that reforms were stepped up.

“I think that the program has largely achieved during the first year what it set out to do. What I do think that the program will not remain on track without a determined reinvigoration of structural reforms in the coming months. Unless we see this re-invigoration, I think that the program will run off track.”

ECB Executive board member Juergen Stark said restructuring was no longer an option.

“It is an illusion to think that a debt restructuring, a haircut or whatever kind of rescheduling or structure you have in mind would help to resolve the problems this country is facing. Greece currently is running a primary deficit so there is no way, no other way than to continue fiscal consolidation, and I would even say to double the effort in fiscal consolidation.”

Meanwhile, Roger Nightingale, the global strategist from Pointon York, said the situation could get worse.

“The problem is being caused by having set up the single currency and basically the only real solution is for Greece to get out of the single currency but of course that is not an option that they are yet looking at – i think they will have to though before long.”

Greece is struggling to meet targets set in the 110 billion euro EU/IMF bailout that saved it from bankruptcy last year.

Bottom line: Greek employees came to blows with police as they protested over cuts to jobs and wages, as European Central Bank executives said if reforms aren’t stepped up the Greek program could derail.