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Greece Debt Crisis: Greek tragedy or a PIGS tale?

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Are we about to enter a third, and this time fatal, leg of the financial crisis? The problems of euroland which have so unsettled markets this week – and in particular those of Portugal, Ireland, Greece and Spain (the "pigs", as they have become known in financial circles) – are worrying enough in themselves

European leaders said they were ready to support heavily indebted Greece to stave off a crisis in the euro zone, but disappointed markets by failing to offer any details on how aid would work.


EU President Herman Van Rompuy told a news conference after a summit of the bloc's leaders in Brussels that Europe was sending Greece a "clear message of solidarity."


But he also made clear that Athens had not submitted a formal request for aid and therefore the bloc could not make concrete pledges at this time, describing the promise of support as a "political statement."

The euro [EUR=X  1.3659    -0.0069  (-0.5%)   ], which had rallied earlier in the day on hopes of a more concrete rescue package for Greece, fell on the comments, sinking below $1.36, down 10% since the peak at the beginning of December ($1.51).

European leaders are keen to prevent Greece's problems from spreading to other highly-indebted members (Portugal, Ireland and Spain, but also Latvia although outside the euro) of the euro zone and plunging the currency area into a bigger crisis that could reverberate around the globe.

"The EU deal creates a whole new set of problems from a cost perspective," said Boris Schlossberg, director of FX strategy at GFT in New York. "The idea here is that if Greece is rescued, then Portugal, Spain and all the other problem economies should also be rescued, and that just opens up a nasty can of worms. The cost of rescuing these economies would be far greater than anyone could imagine."

Germany and France are expected to take the lead in providing support, in part because other big euro zone economies like Italy and Spain are themselves under financial pressure.


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