Greece should turn to the International Monetary Fund if it needs aid, the chief finance spokesman for German Chancellor Angela Merkel’s party said, in a reversal that signals a rift with European leaders Jean-Claude Trichet, Jean-Claude Juncker and Nicolas Sarkozy.
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The German shift underscores Merkel’s attempts to steer clear of any commitment to a Greek bailout and risks scuttling European Union efforts to establish a contingency plan for the debt-strapped nation.
Kudos to Germany for at least attempting to make the international system work as designed. Here's a more compelling reason why Germany can't bail out Greece - it can't realistically afford to do it, and neither can many other European countries:
European Union member states are being dangerously optimistic in their forecasts of economic growth and risk missing their budget targets as a result, the bloc's executive warned Wednesday in a report on 14 states, including its largest ones. EU states have spent lavishly to keep their economies from meltdown over the last year, racking up massive budget surpluses in the process. They are now trying to bring spending back under control, amidst fears for their long-term financial stability.
A direct bailout of Greece would ruin most of Europe's own prospects for recovery.
