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Greek debt crisis: High stakes game of financial chicken

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The big question is whether Germany, with its $200 billion trade surplus, is prepared to help Greece – or whether Chancellor Merkel will stick with her Sunday statement that a Greek bailout led by Europe's largest economy is “absolutely out of the question.” Over the weekend, the Wall Street Journal quoted Greek officials as expecting a bailout package worth more than $40 billion and led by Greece could be agreed to by Friday.

Today EU Commissioner of Economic and Monetary Affairs Olli Rehn is in Athens to investigate and advise Greece on a package of economic reforms. He told reporters Monday after meeting with the Greek prime minister that additional steps by the government must be announced "in the coming days."

Mr. Rehn’s trip is the result of an EU heads of state agreement last month. Then, EU officials said they would intervene “if necessary” to help Greece recover from a crisis brought on by inaccurate reporting of its financial conditions. Greece had not sought formal help at the time.

Reassured markets?

EU leaders hoped the announcement of an "in principal" commitment to help Greece would reassure markets and buy time for German leaders to convince their constituents that a bailout for Greece is necessary. In early afternoon trading the euro fell to $1.348, close to a nine-month low.

“The announcement by the heads of state [in February] was a powerful one,” said Thomas Klau of the European Council on Foreign Relations in Paris. “That Germany would change this and go back on its word is unthinkable in European politics."

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