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business newsMidday Market Report: Greek Reforms Not Up to Snuff
By
Vincent Trivett
Feb 10, 2012 1:35 pm
The cuts they made were too deep for Greeks, not nearly deep enough for the IMF.
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The Eurogroup of finance ministers are refusing to bail out Greece without "strong political assurances from the leaders of the coalition parties on the implementation of the program."
The plan that the Greeks passed includes cutting 5,000 jobs from the bloated private sector, liberalization of laws that decrease Greece's competitiveness, and lowering the minimum wage by 20%, to 600 euros a month. Private bondholders will take a voluntary 70% write-off, but only after Greece obtains the 130 billion euro bailout. And even these reforms will only reduce Greece's debt to 136% of its shrinking GDP by 2020. The IMF target is 120%.
That may be too little to satisfy the IMF, European Commission, and European Central Bank, but it cuts too deep for the already depressed Greek public to stand. Unemployment in the country is already at 20%. Any other country going through times like this could inflate their currency, but Greece is, for now, using a currency that it has no control over. The burden of austerity will rest on Greek citizens. Thousands of Greeks are in the streets and protests are turning violent.
While protests and fires raged outside, four ministers from the right-wing Laos Party and the socialist Pasok Party defected. If defections continue, even the inadequate reforms will not pass.
Now Athens has until Wednesday to somehow agree to cut even deeper. Greece will be holding elections in April, and if the riots in Athens say anything, the austerity measures are not politically popular.
Amidst this chaos, European markets closed below the levels of the previous day. At midday, US stocks are performing poorly as well.
- The Dow (^DJI) is down by 0.93% to 12,770.50. All 30 Dow components are down.
- The S&P 500 (SPY) slipped by 0.77% to 1,341.54.
- The Nasdaq (^IXIC) is 0.77% below yesterday's close, at 2,06.67.
Energy and oil exploration firm Cobalt International Energy (CIE) rose 36.36% this morning after seeing better-than expected flows from a test well off the coast of Angola.
LinkedIn (LNKD) continued its rise after an unexpectedly strong fourth quarter, rising 16.82%.
True Religion Apparel (TRLG) dropped 23.52% after posting disappointing earnings and a downgrade from buy to neutral from Citigroup.
US consumer sentiment is worsening. The University of Michigan's Consumer Confidence survey showed that sentiment dropped more than expected in January, falling from 75 to 72.5.
Twitter: @vincent_trivett
No positions in stocks mentioned.
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