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Monday, May 16, 2011

Dominique Strauss Kahn : Key player to solve Greek Debt Crisis, but he is alleged in sex crime now what?

Dominique Strauss Kahn, who is considered to be a key player to solve Greek debt crisis, but he was alleged in sexual assault in New York yesterday. Now he is questioned about the sexual assault on maid in Hotel and other side finance ministers arrive in Brussels this week for talks on the Greek debt crisis. Now, in the absence of Strauss Kahn, what will happen to him is the questions roaming around, But that doesn't mean there's not still hard work to do about Greece and its debt.

The IMF boss's lawyer says Strauss-Khan will plead not guilty, but the arrest could not have come at a worse time for the euro zone debt crisis as we approach crunch time on the question of what to do about Greece’s debt woes.

He has played a major role in solving debt crisis in 1997. With the exception of Jean-Claude Trichet it could be argued that no French men, including Nicolas Sarkozy, has played a bigger role in the crisis which has seen IMF money handed out to Greece, Ireland and Portugal.

His enforced absence from talks over the future of Greece will be a blow to the IMF. But despite Strauss-Khan’s deputy, John Lipsky, announcing his resignation last week, the IMF is a big organization with plenty of people able to step in if Strauss-Khan is forced to resign or take leave as the investigation into the charges progresses.

Once they finish speculating over Strauss-Khan over espressos when they arrive in Brussels, European Finance Ministers and officials will find themselves with the same problem they faced before Strauss-Khan’s arrest: what to do about the Greece’s debts.

Analysts at Credit Suisse believe they will have four options to consider about how to allow Athens to meet its 27 billion euro funding gap in 2012, given lack of access to capital markets.

“The most likely option—the path of least resistance, in our view—is a continuation of EU/IMF support, likely through an extension of the initial aid package or through Greece's access to EFSF funding,” said Robert Barrie, the head of European economics at Credit Suisse in a research note.

A second option would be for the Greek government to speed up its privatisation plan and to attempt to reduce its deficit faster. Options one and two are not mutually exclusive, clearly.”

Option three involves a voluntary extension of Greek debt maturity and would be far harder to reach agreement on in Barrie’s view.

“Germany and some other northern European nations apparently supported such an option at last Friday’s ‘secret’ meeting in Luxembourg, but the ECB and several euro area countries, including France, were strongly against this option—stressing the potential broader economic, social and political consequences of such a decision,” said Barrie

“According to most declarations over the past few days, this option has been put aside, at least for now. But we wouldn’t be surprised if some form of mild private sector involvement returns to the table.”

A fourth option—a forced restructuring—appears out of the question for all but a few politicians in the euro area at the moment,” said Barrie

With the EU/IMF mission in Greece still to have finalized its conclusions, Barrie does not expect a decision on Greece until the European Council meets in late June.

( Source: CNBC )


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