The troika (made up of the IMF, ECB, EU) has wrapped up their review of Greece’ s finances today, and announced that the next aid tranche worth 8 billion euros will be paid to Greece in November, preventing its default.
This is a breath of good news, though this may just be “buying more time” before the sovereign debt crisis spirals out of control.
Outgoing European Central Bank president, Jean-Claude Trichet spoke before the European Parliament’s Economic and Monetary Committee in Brussels this morning, warning of systemic risk from the sovereign debt crisis. He said the crisis has reached a “systemic dimension,” and threatens the financial system.
“The crisis is systemic and must be tackled decisively,” Trichet told the European Parliament committee in his final appearance before retiring at the end of the month.
“The high interconnectedness in the EU financial system has led to a rapidly rising risk of significant contagion. It threatens financial stability in the EU as a whole and adversely impacts the real economy in Europe and beyond,” he added.
Germany and France, the leading powers in the 17-nation euro zone, have promised to propose a comprehensive strategy to fight the debt crisis at an EU summit delayed until October 23.
After Athens admitted it would not meet its deficit target this year, there is a growing acceptance that a second Greek bailout agreed in July may not be sufficient and a rush is now on to beef up the currency bloc’s rescue fund , the EFSF and bolster its banks.