Tag Archives: Greek Bailout

It’s STILL all Greek!

Eurozone Ministers have arrived at a “pact” in respect of Greece. The pact allows the release of those much-needed loans that have taken up so much of the Eurozone’s time and energy. You may think that this is all very good news for the Greek people.

However, the central core of the agreement is that Greek Public Debt should fall to 124% of  Gross Domestic Product by 2020 and is to be achieved via a raft of more debt-cutting steps and continuing austerity.

This “tentative” agreement should see the release of up to €44 billion in bailout funds to Athens, otherwise….. formal insolvency beckons.

Once again, we are going to be witnessing a process of German dissidence, the continued rise of the IMF, performance-related stage payments, delays etc….as the Greek funding is parsimoniously unlocked in three increasingly painful stages.

The formal decision and an agreement on how these disbursements are to be managed will me made by 13th December. One thing that we can be sure of is that each payment will involve a similar process of troika visits, meetings and procrastination.

Apart from cuts to the interest rate which Greece is having to pay on all of its loans, there will be an 15 year extension of the bilateral and EFSF loans plus a deferral  of 10 years on interest payments on EFSF loans.

So what difference will all of the above make to the average Greek in the street?….NONE.

Yesterday, Bank of Greece Governor George Provopolous said that the Greek economy is expected to grow in 2014. He feels that by then,  Greece’s fiscal problems will have been eliminated.

He did not specify how the country’s political, social and institutional issues will have been dealt-with.

The main effect is that the Markets will now enjoy a few more days in the Greek sunshine…….as they await the next cloud………

Greece and the Moneylenders

Today, there appears to be a general sigh of relief in Europe.  Stock Markets are climbing , driven by a new banker confidence. Positive noises are beginning to emanate from Eurozone Ministers. They are all looking forward to the approval of the latest Greek bailout. Will Monday 20th February 2012 really be the first day of the rest of our Euro lives?

Is it all over? Are we now scaling a slightly easier cliff to the upper plateau of Euro-prosperity? Will disaffected and now disenfranchised Greek people stay indoors and patiently wait 10 or 15 years while their “Neu” European Masters make things better?

Even Germany’s Finance Minister Wolfgang Schauble who finally came came blinking into the daylight a few days ago, appears to have been temporarily muzzled.

Politics are an illusion. The difficulty is in discriminating between the headlines, the expected conclusion and the most likely outcomes.

Today, it looks as if all that Greece has to do is meet the conditions imposed by Germany, Holland and Finland for its latest bailout package to be approved. Furthermore, it also looks as if they may be able to manage  to agree both the bond exchange programme as well as Greece’s debt reduction in one fell swoop.

That has been the real progress. During the last week, there was talk of a two-stage approval, beginning with the most important “victims” – the bankers and hedge fund managers being dealt-with first, followed by the Greek people. Most appear to be in agreement that both aspects can now be dealt with together.

However, Germany (one imagines with the full support of the government and Angela Merkel) continues to make those unpleasant macho Teutonic noises.

For instance, Steffen Kampeter the German Deputy Finance Minister: “This coming Monday, we will see whether Greece delivers or whether we will be forced to decide on another course of action, one that is not desired.”

Despite the posturing , the rhetoric and the barely-concealed German instinct to rule Europe, the 14.5 billion euro  Greek bond redemption will take place on March 20th. It was always going to take place – whether the entire Greek bailout package was approved or not. Even if it meant the cap being passed round the Eurozone – and we’d probably even find the United States and others making a contribution. Not giving money to the hedge fund managers and bankers was never an issue.

The real issue and rather alarmingly, the one which appears to have become the least important to the Eurozone High Command is the welfare of the Greek people. The Euro rulers have already showed the world that they would be quite happy to destroy Greece if they decided that it was expedient to do so.

Eurozone ministers spooked themselves last week on hearing that Greece would miss its debt-reduction goals.

Last year, Greece’s debt was 160% of Gross Domestic Product. This year , after being told to butcher its economy, Greece will probably deliver a reduced debt run-rate (by 2020) of only 129% of GDP. That is quite an achievement – bearing in mind the collateral damage.

However, Euro Ministers are experiencing the vapours because the set target was 120% of GDP by 2020. So what is the answer? You’ve guessed it. More Austerity.

The other unsavoury aspect of the Greek situation is that in spite of the whole arrangement being presented as a process of great charity, profits are being made. Profits are being generated from Greece’s misery.

The first 110 billion bailout in May 2010 was charged at an average rate of 5% per annum. That’s 5 billion euros! Even that was unsustainable because just like the door-to-door moneylender, Greece would be forced to borrow more, just to repay the interest…..and so on.  That rate has now been reduced to 4% per annum – but even so, it seems extortionate.

Euro moneylending is more Shylock than Mother Theresa – plus they do want their pound of flesh – unless of course, they are called Germany , Holland or Finland. They want several kilos of of the stuff.

They are the hawks – the hardliners and they appear to want to see Greece suffer,  to police Athens and hand-out bailout money like a stern uncle dishes out pocket money to his errant nephew.

What European Central Banks should do is simply return their ill-gotten Greek profits or at least direct them at Europe’s crisis programme. This should not be viewed as a profit opportunity.

Too many bankers and fund managers still view Greece only a profit centre.

In keeping with the Eurozone’s habit of creating rules “on the hoof”, there are discussions to fund an escrow account to guarantee that any bailout money goes to where Euroministers decide, thereby removing all management responsibility from Greece and its politicians.

There is one major issue which has not yet been ironed out – the Aladdin Solution – the “New Bonds for Old” proposal.

There are bondholders still resisting a debt-swap , so on February 21st 2012, Greece may be forced to legislate thus forcing those errant bondholders to accept a “new-for-old” arrangement.

What started a year ago as a simple bailout has now taken an unpleasant  politico-bureaucratic aspect which becomes more and more complicated with time.

The Greek people are quite rightly embarrassed by the way that they have been portrayed in the word’s media but one thing which they should always remember is that in spite of the fact that all their Eurozone friends have convinced the world that they want to help Greece – they really only want to help themselves.

They are the greedy moneylenders gathering round  a desperate family – having seen an excellent opportunity for profit.

I have a feeling that the happy ending will belong to Greece.