Is Europe Backing Away From Financial Support for Greece?

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It seemed last week that EU leaders were prepared to come to the rescue of Greece with financial aid -- or at least guarantees for some of its national bond obligation. But those pledges, to the extent that they were pledges at all, have begun to evaporate.Reuters reports that eurozone financial leaders will instead pressure Greece to cut its budget deficit by 4% this year, from its current level of nearly 13% of GDP. It must then be cut to the EU cap of 3% by 2012.

Granted, the EU said at last week's summit that it would not allow Greece to default on its obligations, but it was never clear what that meant. Germany has the largest economy in the EU as measured by GDP, which makes its participation in any Greek aid package critical.

But the German government must face the fact that such an action would be against the will of most of its citizens. A recent survey of Germans showed they did not support financial aid for Greece and would rather see the country thrown out of the eurozone if it cannot get its debt problems under control.

The rescue -- at least as it was reported in the press -- may have never existed. A Greek budget cut is on the table now. With the country's workers willing to strike to keep jobs and slow the national economy rather than face budget cuts, it appears that the standstill over getting the country's house in order will continue.
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