Forex News – Greek default looming, Stark resignation a blow to ECB

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Greece is in danger of not receiving its next aid tranche since the troika (made up of the IMF, EU and ECB) may very well not sign off on the next instalment as a sanction for missed deficit targets this month. Greek Prime Minister George Papandreou’s efforts this weekend to do all in his power to avert bankruptcy may be too little too late.

The German FDP economy minister, Philipp Roesler, said in an article published on Sunday that an orderly bankruptcy of Greece was no longer a taboo and demanded automatic sanctions for heavily indebted countries that did not meet their obligations.

There is growing speculation that Greece will eventually default on its 340 billion euro debt.

Meanwhile, Germany is worrying now about waning European Central Bank influence after the resignation of Germany’s top official at the ECB, Juergen Stark due to his opposition to its controversial bond-buying programme.

Many say that his premature exit has created a clear divide in German Chancellor Angela Merkel’s strategy of tackling Europe’s debt crisis with closer integration, and her drive to secure a conservative majority in parliament for a bigger, bolder euro zone rescue facility during the Bundestag votes on September 29.

Even if Merkel still wins then, there is a risk that subsequent Bundestag votes on a second aid package for Greece and the launch of a permanent bailout fund, known as the European Stability Mechanism (ESM), could present a huge challenge to her leadership.