Tuesday, November 20, 2012

Where Does Greek Interest Go?

by Charles Forelle

Wall Street Journal

November 20, 2012

On the table at tonight’s meeting of European finance ministers is yet another debate on Greece. This one will be about interest rates.

Wait, keep reading.

Europe is stuck. Greece needs more money, and no one wants to hand it over. So finance ministers are trying to find creative ways to cut down on Greece’s cash consumption. Our colleagues Matina Stevis and Costas Paris report that the euro-zone governments are “looking at a sharp reduction in interest rates on the €53 billion they lent Greece under its first program,” which began in 2010.

One problem, note Matina and Costas: The interest rates are already pretty low, and additional cuts would bite into the budgets of, say, Italy and Spain, who have to pay more to borrow themselves than they are receiving by lending to Greece.

In fact, interest is a pretty shallow bucket. It’s not a good sign that European leaders are looking for salvation in it.


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