Greece Warns of Euro Exit If Second Bailout Is Not Finalized

Posted January 3rd, 2012 at 1:40 pm (UTC-5)
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Debt-ridden Greece is warning that it could be forced to abandon the common euro currency if it does not secure a second international bailout to avoid defaulting on its loans.

Greece won tentative European approval for the $169 billion bailout in October, but now the country is engaged in new negotiations with creditors over terms of the deal. Government spokesman Pantelis Kapsis said finalizing the bailout is essential.

He said that negotiations over the next few months will “determine everything.” Greece is currently financing its government with the help of a $142 billion bailout it secured in May 2010, but creditors have demanded that the Athens government adopt new, unpopular austerity measures in exchange for the second bailout.

As a whole, the bloc of 17 nations that use the euro is faced with a stalled economy. But the contrasting fortunes of the continent's individual, national economies became apparent again Tuesday. Debt-plagued Spain reported a 15-year high in the number of unemployed workers, while robust Germany recorded a two-decade low.

Prime Minister Mariano Rajoy's new conservative government in Spain has embarked on an austerity plan to trim its deficit spending, but its economy is troubled. The Madrid government said the number of jobless workers increased in December for the fifth straight month, to more than 4.4 million. More than 21 percent of Spanish workers are unemployed.

Spanish Economy Minister Luis de Guindos said that unemployment is the country's most pressing problem.

The contrast with Germany, Europe's strongest economy, is marked. Germany's jobless rate dipped in December to 6.8 percent. The government reported that the average number of unemployed workers over the last year — just under three million — was the lowest figure since 1991, shortly after communist East Germany reunified with West Germany.

Germany's labor agency chief, Frank-Juergen Weise, said the demand for workers was high throughout 2011. One analyst noted that the unemployment rate has dropped in 29 of the last 32 months.

But Germany's export-driven economy could be weaker this year. The effects of the European government debt crisis and sluggish economic growth in major economies elsewhere could limit demand for German products.