European stock markets opened higher this morning after euro-zone leaders expressed their support for Greece, saying late Wednesday that Greece was an “integral” part of the euro zone.
After Spain managed to sell all of the 4 billion euros it was offering in a debt auction, London shares were up 1.8% at midday, while the main indexes in Frankfurt and Paris were up around 2.5%.
Late yesterday, Greece’s Prime Minister George Papandreou reiterated his government’s commitment to instituting the deficit reductions required as part of its two bailouts. Both German Chancellor Angela Merkel and Papandreou assured the public that Greece leaving the 17-nation euro zone was not an option being considered.
Merkel and French President Nicolas Sarkozy said in a joint statement that, “Putting into place commitments of the [bailout] program is essential for the Greek economy to return to a path of lasting and balanced growth.”
In May, the European Union and the International Monetary fund agreed to give Greece 100 billion euros in emergency loans to be meted out in payments contingent on Greece’s progress in remedying its debt problems. Then in July, it was decided that Greece would receive a second bailout fund of 109 billion euros, which still has to be ratified by the parliaments of a number of euro-zone nations.
Greece is supposed to receive the next loan from its initial bailout later this month, but only if inspectors from the European Union, European Central Bank, and International Monetary Fund agree that Greece has been keeping up its end of the bargain by instituting adequate spending cuts.
Many have feared that, should they rule that Greece has fallen behind, that the country will not receive its next tranche of aid, leaving the country unable to meet its debt payments by the middle of next month, resulting in a default.