Leadership

ECB President cuts short Australia trip

09.02.2010
The European Central Bank (ECB) President Jean-Claude Trichet is cutting short a trip to Australia to attend a special EU summit on the economy, in a move which has ignited speculation that the Eurozone is preparing to tackle the debt problem currently afflicting Greece.

Trichet was in Sydney attending a symposium organised by the Reserve Bank of Australia to mark its 50th anniversary. However, despite being scheduled to attend the seminar today and tomorrow, he is now leaving early in order to make the main session of the EU summit.

The EU is facing a slump in confidence in the Eurozone, due to rising investor concerns over the sovereign debt levels of a number of members of the 16-nation monetary bloc including Greece, Portugal and Spain.

Greece, however, is at the coal-face of concerns over public debt.

The Greek Prime Minister George Papandreou secured cautious European Commission approval for the government’s cost-cutting plan last week.

However, international investors will be watching Greece closely this week, particularly as the ADEDY public-sector union is to stage a 24-hour strike to protest against the tough austerity measures being introduced by the country’s government in order to cut its budget deficit.

Investors will be scrutinising the reaction of the Greek Government to the strike to see if the political will is there to face down union opposition to the proposed public-sector cuts.

The consequences for the Eurozone should Greece fail to rein in its public debts are serious. If public debt in the Mediterranean country continues to rise this will place further pressure on its bonds, with a resulting sharp rise in borrowing costs, which could see fellow members of the 16-nation euro monetary zone having to bail out Greece, or perhaps even expelling the country from the Eurozone as a last resort.