Country Bailout | featured news

The leaders of Germany and France, the eurozone's two biggest economies, say they have reached agreement on strengthening Europe's shaky banking sector.

Greece will miss a deficit target set just months ago in a massive bailout package, according to government draft budget figures released on Sunday, showing that drastic steps taken to avert bankruptcy may not be enough.

Europe is caught in an economic pincer: slow-growth assaults from one side; fickle financial markets from the other. One obvious way out — the China option — seems barred by geopolitics. There is precedent. Historians blame the Great Depression’s severity in part on poor international cooperation. Economist Charles Kindleberger found a vacuum of power: Great Britain, the old economic leader, could no longer lead alone; and the United States — a replacement — wasn’t ready to help. Is there a parallel today between the United States and China? Are we repeating the mistakes of the 1930s? Unsettling questions.

Greeks expressed their misery on Monday at the erosion of their daily lives by austerity measures demanded by international lenders in exchange for bailout funds, ahead of a key parliamentary vote on extra property tax.

By insisting that it receive collateral from Greece in return for aid, Finland threatens to upend an agreement that euro zone countries made in July to expand the E.U. bailout fund.

Greece’s finance minister has called on the EU to implement “fully and immediately” an agreement reached last month overhauling the eurozone’s rescue fund and extending Greece a €109 billion ($157 billion) bailout. The finance ministry says Evangelos Venizelos wrote to senior officials, including European Central Bank President Jean-Claude Trichet, EU economic commissioner Olli Rehn and eurozone finance ministers. Excerpts of the letter were released Sunday.

Riot police fired tear gas at youths hurling rocks and petrol bombs near the Greek finance ministry Tuesday, trying to quell the anger unleashed during mass protests and a general strike as parliament debated new cost-cutting measures.

Under the plan, French banks would give Athens more time to pay back loans as they come due over the next three years.

Egypt will not borrow from the World Bank and International Monetary Fund after revising its budget and cutting the forecast deficit, even though a loan had been agreed, Finance Minister Samir Radwan said Saturday.

Greece has secured a second bailout from the European Union and the International Monetary Fund, and it too will be on the order of €110 billion, Prime Minister George Papandreou said.