Greek politicians earlier this week agreed on a new austerity plan, but this was rebuffed by European finance ministers who laid out further conditions for Greece. In the midst of this development, US President Barack Obama said the United States will do whetever it can to help the euro zone. Meanwhile, China's exports fell in January, the first decline in more than two years, raising fresh concerns about the impact of a global slowdown on China's economy.
European finance ministers have held back a rescue package for Greece. The rebuff has left lawmakers in Athens under government pressure to endorse a newly minted austerity plan or exit the euro.
“In short: no disbursement without implementation,” Luxembourg Prime Minister Jean-Claude Juncker said in Brussels late yesterday after chairing emergency talks of euro-area policy makers. He set another extraordinary meeting for 15 February.
The refusal to deliver a €130 billion (US$173 billion) bailout for Greece reflected the euro area’s frustration with the country’s bickering politicians and the prospect that they may again backtrack on fiscal commitments.
Mr Juncker said the Greek parliament would now have to pass a package of cuts and reforms on Sunday.
In addition, Greek politicians will have to find an extra €325 million (US$432 million) in savings for 2012.
The conditions would need to be fulfilled before Eurozone finance ministers reconvene on Wednesday, he said.
The plan agreed by the Greek government this week includes 15,000 public-sector job cuts, liberalisation of labour laws, lowering the minimum wage by 22 percent and negotiating a debt write-off with banks.
But a key demand of the EU, IMF and European Central Bank was reform of the pension system, an issue that proved to be a stumbling block.
Report: Greece bailout: Eurozone ministers set tough conditions [BBC, 10 Feb 2012]
Report: Greece Rebuffed on Aid Over Austerity Vote [Bloomberg, 10 Feb 2012]
Obama on Eurozone
President Obama says the US will do whatever it can to help stabilize the situation in the eurozone. But he said Europe needs a stronger approach to the debt crisis.
"Something that we both agree on ... is the need for a stronger European firewall that will allow for a more stable path for repayment of debt," Obama told reporters after meeting Italian Prime Minister Mario Monti at the White House in Washington.
Both leaders emphasized the importance of boosting European growth, which was "important not only to Europe, but the entire world economy and to our economy back here," Mr Obama said.
Obama also said that Monti had helped restore faith in Italy's ability to navigate its way out of its debt problems. "Italy has a plan that takes seriously its fiscal responsibilities, but also emphasizes the need for structural reforms that can promote growth".
Report: Europe needs stronger financial firewall: Obama [Reuters, 10 Feb 2012]
China Trade Figures
In other economic news, China's exports fell in January, the first decline in more than two years, raising fresh concerns about the impact of a global slowdown on China's economy.
Analysts say Lunar New Year factory shutdowns do not fully explain a slump in imports, and may instead be evidence of a further faltering in demand.
Imports sank 15.3 percent in January versus the same period a year ago, while exports fell 0.5 percent.
Analysts say ongoing debt issues in the eurozone are still the biggest threat to China's growth. Official figures showed that bilateral trade between China and the European Union fell more than 7 percent in January.
However, the fall in import figures raises fears on the resilience of domestic demand that has shielded the world's second-largest economy from slackening exports.
But Lunar New Year distortions will make policymakers wary of any hasty reaction, so analysts expect them to assess January and February data combined before deciding whether the current policy of gentle easing needs to be intensified.
Report: China's exports and imports dip raising growth concerns [BBC, 10 Feb 2011]
Report: China imports slump, raising demand concerns [Reuters, 10 Feb 2011]