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Greek report Greek report
by Euro Reporter
2011-03-18 07:57:56
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Greece should be given time to sort out its finances before talk of any debt restructuring

Greece should be given time to sort out its finances before talk of any debt restructuring, which would have serious consequences, Peter Praet, a candidate for the European Central Bank's Executive Board said. "We have to think very carefully about the implications if you let a sovereign default of a country in the European Union," Praet told the European Parliament's economic affairs committee on Wednesday. "Some say the negative externalities would be limited. Some have a different judgment, and that is my point of view," Praet told a hearing on his candidature for the ECB post. "You have to give a chance to this programme (of debt reduction) in Greece. It's very tough but the country is very committed."

The consequences of debt restructuring would be "very painful. There are no free lunches", Praet said. The EU and IMF have bailed out Greece, but some in the market fear a restructuring of its debt may be inevitable -- unless strong enough growth returns. EU finance ministers have endorsed Praet's candidature to join the ECB at the end of May; final approval is expected from the ECB itself. EU lawmakers do not have a veto on the appointment of the Belgian to the European Central Bank. Turning to inflation and the future course of euro zone interest rates set by the ECB, Praet said: "We are extremely vigilant, keeping a watching brief on what's happening in inflationary trends."

Praet was echoing the words of ECB President Jean-Claude Trichet earlier this month that prompted financial markets to bet that a rate rise next month is all but a done deal. The current low interest rates could cause problems in the longer term by pushing investors looking for yields to move towards "certain bubbles", Praet said. Praet, a former International Monetary Fund economist, is also a senior official at the Belgian Central Bank and a member of the Basel Committee of global banking supervisors. Responding to calls for common issuance of government debt in the euro zone, Praet said that it would create a more liquid market but that the necessary "solidarity" framework was not in place. "The time is not right. We don't have all the answers to that," he told the hearing. He also doubted that a tax on financial transactions, which the European Parliament has backed, would dampen volatility in the markets.

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Greece unemployment rate jumps in fourth Quarter


Greece's growing army of jobless workers swelled by nearly 100,000 in the fourth quarter, the national statistics service said Thursday, as the country's deepening recession sent unemployment rates soaring and with little sign of an upturn in sight. According to data from the Hellenic Statistical Authority, the unemployment rate rose sharply to 14.2% in the fourth quarter--from 12.4% in the third quarter--and compared with 10.3% reported in the last three months of 2009. In total, 712,065 workers were without jobs in the October to December quarter, up from 621,938 three months earlier. The number of employed in the fourth quarter was 4.3 million. "The latest figures show that the trend in unemployment is deteriorating sharply," said Nikos Magginas, an economist with the National Bank of Greece. "The recession is really impacting the labor market, with effects particularly visible in the light manufacturing and construction industries."

Greece is in the third year of a grinding economic recession with only a modest upturn forecast for the second half of this year. For 2011, official forecasts are for a 3% contraction in gross domestic product, after a 4.5% contraction last year and a 2.3% dip in 2009. Young people remain hardest hit by Greece's deepening recession, with 28% of those aged between 15 and 24 without a job in the fourth quarter, compared with 20.4% a year earlier, the data showed. Women also continued to see fewer job opportunities than men, with the number of unemployed women at 17.9% in the final three months of last year, compared with 10.3% a year earlier. By region, the highest unemployment was in the Ionia Islands, where the jobless rate reached 18.1%, compounded by lack of off-season tourism jobs. In the Attica region, the province that includes Athens and is home to about half the country's population, unemployment was 14.1% in the quarter, up sharply from a 10.2% rate a year earlier. In its 2011 budget, the Greek government estimates that unemployment will rise to 14.5% in 2011 before peaking at 15% in 2012. However, labor unions say joblessness could reach as high as 20% this year.

Since May of last year, Greece has been implementing a tough austerity program in exchange for a EUR110 billion loan from the European Union and the International Monetary Fund. In its latest official forecast from Wednesday, the IMF predicts that Greek unemployment will rise to 14.8% this year. The austerity measures, designed to narrow Greece's budget deficit, have also weighed on economic growth as public sector wage cuts and higher taxes have hammered domestic consumption. As a result, Greece is banking on a revival in its external sectors--its summer-time tourism industry and exports--to jump start growth and add jobs. "Unemployment is expected to worsen in the first few months of this year, but we may see a small improvement in the second and third quarters with the help of tourism and exports," said Magginas. "But I fear that unemployment trends will continue to deteriorate until at least the first quarter of 2012."

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Greece accuses Turkey of harassing Italian ship in Aegean


Greece has claimed a Turkish warship harassed an Italian exploration ship in international waters overseen by Athens, the latest accusation in a deep-seated dispute between the two neighbors over their territorial rights in the Aegean. The Italian ship was exploring a possible fiber optic cable route from Italy to Israel, and had received Greece’s permission to explore the waters near the Aegean island of Crete, according to Greek officials.  

“The Italian vessel was harassed by a Turkish corvette in violation of the rules of international law,” said Greek Foreign Ministry spokesman Grigoris Delavekouras at a press conference in Athens on Wednesday. Delavekouras added that the Italian ship had obtained permission from Greek authorities to study a possible route for an underwater fiber optic cable from Italy to Israel The ship was within the Greek continental shelf, Delavekouras continued. He added that the Greek Embassy in Ankara lodged an official complaint about the incident to Ankara.

The delimitation of the Turkish and Greek continental shelf in the Aegean is one of the features of the complicated Aegean disputes. Turkey says the continental shelf should be measured from the continental mainland, while Greece says the Greek islands that line up along Turkey’s west coast should be taken into account while measuring the boundaries of the Greek continental shelf. Turkey’s argument would mean Turkey is entitled to economic zones up to the median line of the Aegean -- leaving out the territorial waters around the Greek islands in its eastern half, which would remain as Greek exclaves. Greek argument, on the other hand, would mean that Greece would gain the economic rights to almost the whole of the Aegean.


        
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