Greece

A general strike Wednesday in Greece was halting flights, trains and ferries and paralyzing public services, as unions rally against major new spending cuts aimed at saving the country from bankruptcy, The Associated Press reported. All flights into and out of Greece stopped at midnight Tuesday. Schools, hospitals, tax offices and the Acropolis along with other ancient sites will be closed. There will be no news broadcasts, and shop owners have been called on to close their shutters during rallies.

The €110 billion ($147 billion) three-year Greek bailout by euro-zone countries and the International Monetary Fund won't be enough to cover Greece's costs, an examination of Greek financial figures shows, setting Europe up for more tough choices if private markets don't start lending again, The Wall Street Journal reported. The bailout announced here over the weekend will solve one pressing problem: Greece will have enough cash to repay an €8.5 billion bond that comes due in two weeks.

Greece, effectively bankrupt and with a European gun to its head, committed itself to years of austerity on Sunday when it signed a financial bailout deal with the European Union and the International Monetary Fund, The New York Times reported in an analysis. But there are serious questions about whether the deep cuts in salaries and benefits the agreement calls for are politically sustainable over time, even as deflation will make it impossible for Greece to grow its way out of debt.

Euro-zone countries and the International Monetary Fund, seeking to halt a widening European debt crisis that has threatened the stability of the euro, agreed to extend Greece an unprecedented €110 billion ($147 billion) rescue in return for draconian budget cuts, The Wall Street Journal reported. Under the three-year agreement announced here late Sunday, Greece would receive €80 billion in loans from other euro-zone members and €30 billion from the IMF. The planned rescue is the largest ever attempted by the IMF and a first for the 16-member euro zone.

Harvard University Professor Martin Feldstein said Greece will eventually default on its bonds and other euro-area nations may follow, most probably Portugal. “Greece is going to default despite all the talk, despite the liquidity package,” Feldstein, who warned almost two decades ago that the euro would prove an “economic liability,” said in an interview with Tom Keene on Bloomberg Radio yesterday.

Greece has agreed the outline of a €24 billion austerity package, including a three-year wage freeze for public sector workers, in return for a multibillion-euro loan from the eurozone and the International Monetary Fund, according to people familiar with the talks, the Financial Times reported. Final details of the measures, which were intended to slash the budget deficit by 10-11 percentage points of gross domestic product over the next three years, were still being worked out, a senior government official said.

Europe's hopes of containing Greece's credit crisis dimmed as the country's debt woes spread to Portugal, sparking a selloff in markets across the globe and testing the European Union's ability to protect its common currency, The Wall Street Journal reported. The euro tumbled to its lowest point in a year against the dollar after Standard & Poor's Ratings Services cut Portugal's credit rating two notches and downgraded Greece's debt to "junk" territory, a first for a euro-zone member. The move is bound to worsen Greece's already dire fiscal situation and hamper a recovery.

A Greek official said the International Monetary Fund is considering increasing its promised €15 billion ($19.76 billion) loans to Greece by between €5 billion and €10 billion, but expressed doubts about whether the boost will happen, The Wall Street Journal reported. “Everything is still very fluid. If our partners and creditors feel that more money is needed to finally calm the markets and stop hurting the euro, more money could be approved. It is being discussed among all parties involved," the official added, without elaborating. The IMF wasn't immediately available for comment.

The Greek debt crisis is approaching a moment of truth. With short-term Portuguese, Spanish and Irish bonds falling sharply Monday, euro-zone policy makers are running out of time to stop the crisis engulfing other member states and threatening the euro area as a whole. To avoid contagion, three things must happen, The Wall Street Journal Heard on the Street blog reported: The Greek problem must be sealed off; countries need to flawlessly fulfill their deficit-reduction promises; and global growth needs to be buoyant. That's a tall order.

Sinking under the weight of its own debt and shunned by international investors, Greece on Friday asked fellow euro-zone members and the International Monetary Fund to bail it out, a humbling step that reshapes the rules of the currency union and, for Greece, augurs years of economic pain, The Wall Street Journal reported.