President Obama has pressed the EU to consider a second bail out for the Greek economy and has pledged his country’s help in saving Greece from defaulting on its’ initial bailout. He is concerned that a repeated crisis in the Euro zone would indicate the same for the United States.

Obama met with Angela Merkel and talked about the importance of Germany’s leadership in shoring up and growing the Greek economy. “Other countries in the euro zone are going to have to provide them a backstop and support,” he said.” And frankly, people who are holding Greek debt are going to have to make some decisions, working with the European countries in the euro zone, about how that debt is managed.”
Merkel will have to walk a fine line in coming months as she balances pressure from within Germany to avoid becoming the financial savior of Europe with the pressure from other countries to do exactly that. A preliminary proposal is in the works to give between 80 and 100 billion Euros of aid to Greece.

Greece first accepted a 100 billion Euro loan to cover its debts in April 2010 from the EU and 40 billion Euros from the IMF bailout package. Stock markets and the Euro declined in response to Standard & Poor decreasing the debt rating to BB+, essentially a junk rating. In May a series of austerity measures were implemented, which were met with rather minor objections. Greece’s bailout occurred at the same time as the one in Portugal.

The bailout has not seemed to work very well, and Greece is in danger of defaulting on its loans. The original problem came from the fact that the government had for years estimated the budget deficit rate at was at 6-8% of GDP. The new Socialist government in 2009 revised this to 15.4%. This, along with massive increases in personal debt, led to increased borrowing costs. There are also concerns that Greece has tried to cover up the extent of its debt in the midst of the recession.

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