Friday October 24, 2014 Search
Weather | Athens
19o C
12o C
News
Business
Comment
Life
Sports
Community
Survival Guide
Greek Edition
On Greece, Lagarde is the grown-up at the table

One way or another, the governments and other official lenders that have bailed out Greece and now hold its debt are going to lose some or all of that money. They can let it go now, by providing Greece with debt relief, or they can lose it later -- possibly as part of a disorderly Greek default and exit from the euro area.

Their failure to recognize this binary choice was on display again Nov. 12, when finance ministers from the 17-nation euro area put off until later this month a decision to release the next 31.3 billion-euro tranche of bailout funds, leaving Greece to figure out how to roll over a 5 billion-euro debt payment this week.

Instead of confronting Greece’s debt problem head-on, the finance ministers sought to give the government two more years -- until 2022 -- to get its debt burden down to the target of 120 percent of gross domestic product. Once they’ve figured out how to pay for Greece’s extra time, projected to cost 32.6 billion euros, the euro leaders will no doubt declare victory. They’ll pretend that they haven’t just approved yet another bailout, and that a return to solvency is within Greece’s financial and political ability to achieve.

No wonder the International Monetary Fund’s general director Christine Lagarde rolled her eyes at a post-meeting news conference. She insisted on sticking to the current 2020 target date, and she was right: Europe’s leaders must have a more realistic debate now on what a Greek rescue will take, and not just for the sake of the IMF’s integrity. Waiting, if that’s the plan, until after German elections in 2013 would probably be too late for Greece and possibly for the euro.

A leaked draft review of the Greek bailout by the so-called troika of official creditors -- the IMF, the European Commission and the European Central Bank -- underscores the urgent need to stop pretending and give Greeks and investors reason to believe in the program’s eventual success. The assessment warns that “risks to the program remain very large” -- primarily due to the Greek government’s weakness and the threat that continued lack of confidence in its ability to emerge from under its debt pile will make failure self-fulfilling.

Perceptions in northern Europe that make it harder to spend more money on the bailout are also self-reinforcing. Greek governments have been feckless in the extreme, but as the European commissioner for finance, Olli Rehn, said this week, “It is time to debunk the perception that no progress has been made. This perception is damaging, it is unfair, and it is simply wrong.”

Greek Prime Minister Antonis Samaras, for all his previous sins in blocking early reforms, last week took enormous political risks to satisfy the troika’s demands. The effort nearly collapsed his coalition government and prompted violent protests in the streets.

Consider the scale of the pain that Greece has already suffered. Amid a Depression-scale economic contraction, the government has cut spending and raised taxes by a total of about 13 percent of gross domestic product since 2009. That’s more than the 10 percent target the troika had set for 2010-2014, and roughly twice the size of the feared U.S. fiscal cliff. The new cuts that Greece’s government pushed through last week should amount to a further 5 percent of GDP over the next two years.

Budget cuts have fallen primarily on public-sector salaries, pensions, health care and -- in a country that’s deeply sensitive over territorial disputes with Turkey -- defense. Public expenditure on health, for example, dropped by 25 percent and is now scheduled to fall by a similar amount over the next two years.

There are good reasons for many of the cuts. Greek public- sector wages and pensions rose unsustainably before the crisis and now need to come back to earth. Pharmaceutical prices in Greece were outlandishly high. But the pain is undeniable, and it’s nothing short of amazing that Greece’s government has agreed to more of it. With more than half of all young people unemployed, and the government forecasting that the economy will shrink by a further 4.5 percent next year, it is hard to imagine Greeks carrying through with the cuts and societal transformation demanded unless they can see a believable path to recovery. If Europe’s leaders refuse to consider the only solution likely to work -- a debt writedown -- they will have nobody but themselves to blame if they lose their money to a default.

[Bloomberg]

ekathimerini.com , Wednesday November 14, 2012 (10:22)  
Tension for tension’s sake?
Testing ground
Defusing a crisis
PM needs to step up
Venizelos slams Turkey for ´flagrant violation of international law´ off Cyprus
Foreign Minister and Deputy Prime Minister Evangelos Venizelos on Friday condemned Turkey for "the flagrant violation of international law," referring to the presence of a Turkish research v...
Cyprus president to be released from hospital on Friday following readmission
Cyprus President Nicos Anastasiades was on Friday expected to be discharged from a hospital in Brussels to which he was admitted after suffering nosebleeds caused by high blood pressure. Ana...
Inside News
ECB bank assessment to show 6-billion-euro capital gap, Citi says
The euro area’s biggest banks will show a 6 billion-euro ($7.6 billion) capital gap in the European Central Bank’s tests of the quality of their assets and ability to withstand economic shoc...
ECB vies for third time lucky in European stress tests
For the European Central Bank, success as the euro area’s financial supervisor may begin this weekend with a few failures. At noon in Frankfurt on October 26, investors will learn which of t...
Inside Business
SOCCER
Panathinaikos snatches point at Eindhoven
Panathinaikos offered its fans a glimpse of its glorious past in European competitions snatching a draw at PSV Eindhoven, on an otherwise bad night for Greek soccer in the Europa League, as ...
BASKETBALL
Greens succumb to first loss at Bayern
Panathinaikos’s unbeaten run in all competitions came an end on Thursday as the Greek champion lost 81-75 at Bayern Munich for the Euroleague. Bayern is a team that improves every year, and ...
Inside Sports
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
 RECENT NEWS
1. ECB bank assessment to show 6-billion-euro capital gap, Citi says
2. Venizelos slams Turkey for ´flagrant violation of international law´ off Cyprus
3. ECB vies for third time lucky in European stress tests
4. Cyprus president to be released from hospital on Friday following readmission
5. Cyprus GDP upgrade seen as boosting bailout exit plans
6. Clocks to go back 1 hour on Sunday
more news
Today
This Week
1. Woman killed in tram accident in Floisvo, south of Athens
2. Clocks to go back 1 hour on Sunday
3. Cyprus GDP upgrade seen as boosting bailout exit plans
4. Cyprus president to be released from hospital on Friday following readmission
5. ECB vies for third time lucky in European stress tests
6. ECB bank assessment to show 6-billion-euro capital gap, Citi says
Today
This Week
1. The past, present and future of the Greek debt crisis
2. Coalition shooting itself in the foot
3. Greece’s closed society is central to its current malaise
4. Greece must stick to reforms, says Schaeuble
5. At least 11 banks to fail European stress tests, three in Greece, report says
6. Cyprus to block Turkey's EU talks after EEZ violation
   Find us ...
  ... on
Twitter
     ... on Facebook   
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright © 2014, H KAΘHMEPINH All Rights Reserved.