Greece Strikes as Central Banks Cut Rates
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December 1, 2011 TheFreshOutlook  |
Greek workers strike as French President Sarkozy is to announce changes to EU treaty and Central Banks cut interest rates.
Greek workers are holding a 24-hour strike today in order to protest against the new government’s austerity measures.
It is the seventh general strike to take place in the country this year.
Tax offices, courts and schools will be closed and public transport will not be fully operational, although Greek newspaper Ekathimerini reports that air travel will be largely unaffected. Only emergency medical staff will be working in hospitals.
The strike comes as French president Nicholas Sarkozy is expected to make an announcement about proposed changes to the EU treaty on fiscal responsibility.
The proposals to change the treaty are welcomed by Britain. However, officials in Brussels worry that in order to agree to change the treaty, Britain might demand to regain some powers.
Germany is another country pushing for the changes. The German chancellor Angela Merkel is arguing that making changes to the treaty is a better solution than investing in eurobonds.
Yesterday, central banks announced that they would cut the interest rate on emergency dollar loans to banks by 0.5 percentage points with the intention of easing pressure from the financial situation. This caused the price of stocks to rise.
Temporary bilateral liquidity swap arrangements will also be established so that liquidity can be provided quickly between banks in any required currency.
The United States financial secretary, Tim Geithner, has welcomed the cuts. He said: “We [the United States Government] welcome and support the actions taken by central banks around the world today to help ease pressure on the European financial system and help foster the global economic recovery.”
Washington, which has strong financial links with the European Union, has long been hoping for a solution to prevent a further financial crisis.
The new decision made by the central banks will stand until February 2013.
Chief economist at foreign exchange company World First, Jeremy Cook, suggested that central bankers are tired of European leaders’ failure to fix the euro crisis.
He said: “Cutting swap costs is the equivalent of interest rate cuts. This may have been a signal that the money markets were a short shove away from complete collapse. Clearly the world’s central bankers have had enough of all the political mud-slinging and intransigence and they’ve decided to take the situation by the scruff of the neck.”
The Bank of England warned today that British banks must start building their capital now in order to avert a financial disaster. The Bank of England’s governor, Melvyn King, said that the bank was making contingency plans in case the eurozone were to break up.
By Louisa Guise
[Image courtesy of epSos.de]
