Greek PM says US banks may face legal action

Athens: Greece may investigate US investment banks and their role in the run-up to the Greek debt crisis which has shaken faith in Eurozone economies, prime minister George Papandreou said in comments broadcast on Sunday. 

    Wall Street and major banks around the world are attracting scrutiny from regulators who are looking at transactions that occurred in the run-up to the subprime mortgage meltdown and financial crisis. US prosecutors are already conducting a broad criminal investigation of six major Wall Street banks to determine if they misled investors. 
    "We are right now having a parliamentary investigation in Greece which will look into the past and see how things went the wrong direction and what kinds of practices were negative practices," Papandreou said. "There are similar investigations going on in other countries and in the United States ... I hear the words fraud and lack of transparency. So yes, there is great responsibility here," he said. Asked whether there was a possibility of legal action against the banks, he said: "I wouldn't rule out that this may be a recourse also ... but we need to let the due process proceed and make our judgments once we get the results from the investigations." 
    The European Union and International Monetary Fund agreed a € 110-billion ($140-billion) bailout of Greece a week ago after Athens could not service its debts. The Greek government has been forced to make swinging spending cuts and hike taxes in an attempt to reduce its deficit from some 13% of GDP to the Eurozone target of 3%. Papandreou said his government had already cut its budget by 40% in the first quarter compared to last year and that revenues from VAT were also up by 10%. But the measures are likely to come at a huge social cost and investors are watching closely the tide of protests welling in Greece and looking to see whether Papandreou's Socialist government will withstand the public pressure. 
    But even as large protests regularly fill the streets of Athens, opinion polls show most Greeks believe the EUIMF package was necessary to put the country back on track. Most, however, believe the burden is being unequally shouldered by ordinary people, while the wealthy and politicians prosper. REUTERS Euro set for long-term slide 
    The euro is set to slide further and could be heading for parity with the dollar, analysts say. The single currency's weakness and mounting fears over Europe's recovery prospects could hit growth in Britain. 
    The euro fell to a 19-month low against the dollar of dollars 1.23 on Friday night, amid fears that the austerity measures countries need to adopt to satisfy the EU authorities and the International Monetary Fund could tip them back into recession. Sterling ended the week up against the euro at € 1.18, but down against the dollar at $1.45. 
    Olli Rehn, Europe's economic and monetary affairs commissioner, stoked fears about the pain ahead for Europe when he said on Saturday that the € 750 billion (£638 billion) crisis mechanism agreed last week should be made so unattractive that countries will not want to use it. 
    "It is essential that we prepare ourselves for the worst-case scenario. But of course there is the issue of moral hazard," he said at the annual meeting of the European Bank for Reconstruction and Development. THE SUNDAY TIMES

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