Wednesday August 27, 2014 Search
Weather | Athens
31o C
24o C
News
Business
Comment
Life
Sports
Community
Survival Guide
Greek Edition
Europe must face facts and forgive some of Greece's debt

Greece and its creditors are wrestling with the country's debts yet again. It probably won't be the last time. As long as they keep making the same mistake, the next agreement is no more likely to succeed than the others.

Back in 2010, Greece was given one of the biggest bailout programs in history. It got new lending in return for fiscal austerity, but its debts weren't reduced: Creditors were spared any write-offs. Experts objected that the program put too big a burden on Greek taxpayers, that this was neither politically nor economically sustainable, and that creditors should be made to take losses. They were right then, and they still are.

There's been some limited bailing in of creditors since then, an extension of maturities and lowered interest rates, but the basic pattern hasn't changed. As a result, Greece's debt keeps rising. It now stands at roughly 180 percent of gross domestic product. This is plainly unsustainable.

The new fix under discussion, according to a recent Bloomberg News report, would extend Greek loan maturities further, to 50 years from 30, and lower the interest rate paid by 0.5 percentage point. Another bailout loan, adding 15 billion euros, also looks likely. All this might keep the show on the road and allow the so-called troika representing Greece's creditors -- the European Commission, the European Central Bank and the IMF -- to say that the country can meet its debt target of 124 percent of GDP by 2020. Of course, after every previous negotiation, they also said that Greece was on track.

The arithmetic keeps failing because the politics and economics refuse to play along. Greeks have come to hate the troika (and especially Germany, whose views have carried great weight), blaming its members as much as their own leaders for a prolonged depression that has left 60 percent of young Greeks unemployed. Growth is forecast to turn positive this year, for the first time since 2007, but on the current approach austerity and the suffering that goes with it will have to continue for years. The pro-bailout coalition that rules Greece is fragile. Without debt reduction, the new program is no more likely to stick than its predecessors.

The troika, to be sure, has reason to doubt the Greek government's commitment to reform. Many of the changes the troika is demanding -- such as abolishing laws that protect professions, distort prices and make it hard to fire unproductive public servants -- would be good for the country. Yet the public trust needed to enact such sweeping reforms was exhausted long ago. A measure of explicit debt forgiveness, even now, might help to change that.

Investors, for the moment, aren't worried that Greece might soon crash out of the euro area, so the pressure for a new approach isn't intense. In a way, that's unfortunate. Greece still needs debt forgiveness -- and the European Union needs to show that it's capable of learning from its mistakes.

[Bloomberg]

ekathimerini.com , Wednesday February 12, 2014 (10:50)  
Diplomacy, not dogmatism
Preachers of hatred
The battle against progress
De-escalating the tension
Greek pop idol Michalis Hatziyiannis detained over suspect car theft report
Pop singer Michalis Hatziyiannis and his accountant were detained on Wednesday on charges of submitting a false statement after the latter allegedly reported to police that the license plate...
Prolific swindler netted by Thessaloniki police
A 44-year-old fugitive believed to have defrauded at least 22 elderly Thessaloniki residents out of more than 67,000 euros has been arrested, police in the northern port said on Wednesday. A...
Inside News
Greek stocks rise for seventh day, but only just
The Athens stock exchange general index rose but by the tiniest of margins for a seventh straight day on Wednesday as it hit 1,177.49 points, an increase of 0.01 percent. The benchmark f...
Ryanair to submit bid for Cyprus Airways
Ryanair Holdings Plc will submit a non-binding offer for Cyprus Airways on Friday as Europes No. 1 discount carrier seeks to extend its footprint eastward to an island increasingly popular ...
Inside Business
SOCCER
Ranieri brings in new faces for his first Greece squad
New Greece coach Claudio Ranieri announced Wednesday a 24-man squad for the first Euro 2016 qualifier against Romania at home on September 7. Earning a first time call up were Olympiakos 21-...
SOCCER
Roma signs Greece defender Manolas from Olympiakos for 13 mln
Greece international Kostas Manolas has joined Roma on a 13 million ($17 million) transfer from Olympiakos, as coach Rudi Garcia looks to strengthen his worrisome defense before Serie A sta...
Inside Sports
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
RECENT NEWS
1. Greek stocks rise for seventh day, but only just
2. Greek pop idol Michalis Hatziyiannis detained over suspect car theft report
3. Prolific swindler netted by Thessaloniki police
4. Ranieri brings in new faces for his first Greece squad
5. Nearly 2,000 Europe-bound migrants have drowned this year, UN says
6. Detained GD deputies granted permission to attend swearing in ceremonies
more news
Today
This Week
1. ND gains one deputy as ousted MP sworn in Lamia mayor
2. Draghi soothes bond market after summer of strife
3. Venizelos hails Gaza ceasefire
4. ND honorary president taken to hospital
5. Ryanair to submit bid for Cyprus Airways
6. Bishop Vartholomaios of Megara and Salamina dies
Today
This Week
1. Carved sphinxes at Ancient Amphipolis tomb will not be removed
2. Brussels warns Greece over plans to allow construction near Korinos beach
3. Logged out of reality
4. Merkel cites euros construction flaws as economy sputters
5. Second man held over double murder in Mani
6. Attack on gay couple in Athens leaves one man needing surgery
Find us ...
... on
Twitter
... on Facebook
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright 2014, H KAΘHMEPINH All Rights Reserved.