Austria Balks at Greece, EMU Bedeviled by more than Ireland

More on Ireland Here

News reports indicate that Austria is refusing to release its 190 mln euro share of the EU bailout for Greece because it has not met its budget commitments. The Fin Min Proell says that after reviewing the latest data, there is "no reason, from Austria's point of view" to allow the December tranche to be paid.

Recall that yesterday Eurostat revised up 2009 Greek deficit and last week Greece reported a 1.1% contraction in Q3 GDP. The weaker growth implies that tax revenues likely missed their target. Local press in Greece has speculated about an additional 4 bln euro in savings in FY2011 budget, half of which may come from spending cuts. Meanwhile, the news largely offset the other press reports that Ireland is indeed edging toward an aid package.

Reasonable people may differ of course, but the price action and news stream underscores our suspicion that an aid package for Ireland does not lift the pressure off Europe for very long. Cash on hand, as the case for Greece (largely), Portugal (2010 needs met) and Ireland is not sufficient. This phase of the crisis is different that the Spring episode. It is not about liquidity, but credibility and solvency.