EU Considers European Monetary Fund to Help Countries Like Greece

BY Carolyn O'Hara  March 8, 2010 at 2:03 PM EST

Greece is preparing for a fresh round of strikes and protests this week, after the government unveiled a $6.5 billion austerity program that includes a sales tax hike, cuts in benefits and salaries for the public sector, and a 5 percent cut in education spending.

Hospitals, schools, and public transportation were shut down Friday to protest the new measures. (Check out this timeline of Greece’s credit crisis for more information.) The Greek government’s own projections suggest the measures will result in two years of recession.

Judy Woodruff sits down with Greek Prime Minister George Papandreou Monday on the NewsHour to discuss the new measures and the country’s response to its debt crisis.

The EU is also reportedly debating whether to establish an IMF-style European Monetary Fund that would bail out financially troubled countries such as Greece in the future.

Germany and other countries have resisted allowing Greece to turn to the IMF for help with its massive debt troubles, even though they pledged to help Greece avoid default. (Paul Solman recently investigated how the United States would be affected if EU countries defaulted on their debt.)

“Accepting financial aid through the International Monetary Fund would in my opinion be an admission that the euro countries can’t solve their problems through their own efforts,” German Finance Minister Wolfgang Schäuble said this weekend.

Any new fund would not be established in time to help Greece with its immediate debt problems, but it would be designed to tackle future crises.

Nariman Behravesh, chief economist at IHS Global Insight, recently explained on the NewsHour what would happen if Greece defaults on its sovereign debt:

Economists Simon Johnson and Scheherazade Rehman also broke down the implications for the euro zone: