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Greece Denies New Bailout as Markets, Rating Agencies React

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Even as Greece denied a Dow Jones report that it would be receiving a new bailout package to the tune of almost 60 billion euros ($85.71 billion) as it continued to deal with its debt crisis, senior euro zone policymakers said that the new package might come as soon as June.

Ratings agencies reacted Monday to the rescue, not the denial, with Standard & Poor's dropping Greece further into junk territory and others warning of similar steps. And Tuesday a New York Times op-ed called for the country to leave the euro behind.

Reuters reported that a senior Greek finance ministry official who asked not to be identified said, "Greece is not holding any discussion on any new aid package. Such reports about discussions on new aid are not true." However, after a meeting in Luxembourg on Friday, Jean-Claude Juncker, chairman of the Eurogroup of finance ministers of the euro zone, said there was a consensus that Greece would indeed need a second rescue.

Ratings agencies took their actions in the wake of that acknowledgement by European Union (EU) officials that not only would Greece need another bailout, but that they were also considering easier terms for Athens and lower interest rates for Ireland as well. AdvisorOne reported on Monday first, that a new rescue was in the works, as Greece denied plans to leave the euro zone, and second, that the country fell to a B rating, with Moody's Investors Service placing the rating on review. Fitch Ratings would not comment on a German newspaper report that it planned to slash the country's rating this week.

Mark Weisbrot, the co-director of the progressive Center for Economic and Policy Research, said in a Tuesday op-ed in the Times that the best course for Greece would be to leave the euro zone so that, instead of facing years of austerity, it would have the opportunity to grow its economy out of crisis. Weisbrot cited Argentina as an example of how such an action might work. Argentina defaulted on its debts to the International Monetary Fund (IMF) and severed its currency's connection to the U.S. dollar.

"Most economists and the business press predicted that years of disaster would ensue," he wrote. "But the economy shrank for just one more quarter after the devaluation and default; it then grew 63% over the next six years."


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