Euro Bank makes US$14 billion concession – if Greece agrees to austerity deal (+ analysis); Argentina accuses UK of "militarising" south Atlantic and takes Falkland's claim to UN; South Korea to make weapons for Saudis in new deal; CIA boss considers Burma trip; Protesters back Maldives' first democratically elected PM

Top of the Agenda: ECB Makes Concession Over Greek Holdings

The European Central Bank, one of Greece's largest creditors, agreed to exchange Greek government bonds it purchased on the secondary market last year at a price below face value (WSJ). The move follows increasing pressure by the International Monetary Fund on Greece's official creditors to alleviate some of Greece's debt burden. The ECB's decision could reduce Greece's debt by around $14 billion.

However, the concession is contingent upon the Greek government ratifying fresh austerity measures--a condition for a second $170 billion EU-IMF bailout--and agreeing to a debt write-down agreement with private creditors. Greek workers protested against new spending cuts and tax increases on Tuesday as Greek officials struggled to reach an agreement over the new austerity measures.

Analysis

"It is time for politicians to admit that their carrot and stick strategy has failed. The idea that the country can be freed from its debt quagmire though austerity programs and aid pledges tied to conditions just isn't going to work. It won't even work if private creditors forgive part of the country's debt," writes Der Spiegel's Stefan Kaiser.

"It would be dangerous for the eurozone's highly indebted countries to abandon austerity now. Any country that enters a period of heightened risk aversion with a large debt overhang faces only bad choices. Implementing credible austerity plans constitutes the lesser evil, even if this aggravates the cyclical downturn in the short run," writes Daniel Gros at Project Syndicate.

"Before the ink of the Maastricht Treaty was dry, it was criticized for creating an incomplete monetary and fiscal construction. Maastricht provided for a single monetary policy but left economic, fiscal and social policies to national governments. The European Central Bank was put in charge of monetary policy, but the Treaty didn't create a fiscal counterpart," writes Viviane Reding in the Wall Street Journal.

 

PACIFIC RIM

South Korea, Saudi Arabia to Strengthen Defense Ties

South Korean President Lee Myung-bak and Saudi Defense Minister Salman bin Abdulaziz Al Saud agreed to develop a defense cooperation pact, which could include provisions for South Korea to export weapons to Saudi Arabia (Yonhap).

BURMA: US CIA Director David H. Petraeus (NYT) indicated that he could visit Burma this year, in another sign of the United States' willingness to acknowledge recent democratic reforms by Burma's military-backed civilian government.

Burma's sudden transition from repressive pariah to potential democracy should be viewed through the lens of a military alarmed by revolts and by the country's increasingly shaky economic condition, says CFR's Joshua Kurlantzick in this Expert Brief.

 

ELSEWHERE:

Thousands protest "coup" in Maldives

Argentina to take Falklands claim to the UN

 

This is an excerpt of the CFR.org Daily News Brief. The full version is available on CFR.org.

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