For now, there is jubilation across Europe for what may be the long awaited answer for a problem that was on its way to wipe out the modest economic recovery that global economies were scrounging together since the 2008crisis.
Almost a decade ago, Greece decided to embark on an adventurous economic journey when it ditched the drachma currency. They signed up for the euro, but I have to emphasize here, that [and this is my own opinion] the trouble had nothing to do with the currency change, but rather the country’s lavish spending bill once it unlocked the secret to cheap debt.
Sooner or later, Greece learned that there was nothing like “free money” and sooner or later someone had to pay the piper.
To show how deep the problem had become, this is the same country that went asking for $155 billion a few months ago; one year after the same Eurozone and IMF dumped a similar amount in its lap to save the country from its economic mess.
From the outside looking in, it appears our friends in Athens either didn’t get the memo, or simply didn’t care. Austerity measures kicked in when the government was forced to cut public sector benefits, and increase taxes to slow down the inevitable. The IMF and European Union came to its rescue, but there is so much any institution can do before it starts asking the tough questions [or ran out of cash also].
I am sure the Economist magazine will devote ample articles to Greece [free advertising for Economist here], so I’ll save you the analysis. Let’s just say, global markets can breathe again, because any solution offered by the European Central Bank and IMF saves the rest of us from bearing the brunt of a debt crisis we had no business creating.
No one can say for certain if this plan will work. What we know is that private banks agreed to revalue Greek debt by as much as 50% [down from the21%], European banks will have to reconfigure their revenue streams and create their own buffer systems, as well as European leaders adding more “rainy day” cash to the European Financial Stability Fund without making taxpayers fund any future bailouts.
All that sounds nice and spiffy, but the best strategy of all remains the tried and tested economic policy; - live within your means.
The Greeks gave the world a lot of history, art and culture, and of course the 2004 Athens Olympics which it spent borrowed money to showcase. That’s neither here nor there. Now, thanks to them, the world has a blueprint for pushing a national economy over the edge. The real question is which country will be next to repeat the same fiasco?
I have lived long enough to know that it’s only a matter of time. I hope I am wrong.
16 comments:
E,
The EU problem will be there forever because there vast differences and economic competencies of each country. Time tells, but Spain and Portugal is may follow suit
revalue 50%. .thats super. can i get the same for this stupid AMEx bills?
This unrealistic financial s&%# must come crashing down someday. Why in the world would investors be happy about losing 50% of their money?! On top of that, pouring even more money into a country that lied to join the E.U. and has severe problems collecting taxes and cheating.
$3.7 billion in debt insurance is a lot of mess
Resolving Greece's sovereign debt crisis should be the priority fo the Greeks themselves to fix once for all. . .the politicians and central bankers need to be flogged for their gross incompetence. .
Be careful of last-minute agreements to fix or "restructure" a debt crisis.
Tax payer money goes down the drain. . . . again
The sad thing is that the EU is touting this as be the real solution when in fact is will not going to fix a thing in the long run. . If Germany and France had their own way Greece will vanish, like any other irresponsible country in the EU
Europe is a lesson of what NOT to do in the U.S.
European countries hold hands with each other, but each member is free to conduct their financial affairs to their selfish interests without regard for the health of the whole. No wonder this disaster is messing the whole EU up
But a big step in the right direction
Much language in the statement directed at more coordination and direction from the EU to national budget, economics and tax policies. It will be telling to see how willing nations are to avail themselves to EU mandates and directives.
There you go, another bailout. These looters will not stop unless west stop being slaves to this system.
The core problem isn't anything other than the disparity between what a person or a county earns and what they choose to spend. you are right sir. live within your means. . It's a very simple concept but potentially very powerful. but why are these idiot celebrating???? The Greeks pay back 50% on their bonds, Europe pours Billions more into a country that lied to join the E.U. in the first place. On top of that Greece and has a very corrupt tax/cheating system.
I have no doubt Greece will continue to over spend and be right back in the same position within a year.
they are celebrating because getting 50% back on their bad investment is better than 0%. The latter is what they would have got by forcing Greece to become bankrupt. Instead, by agreeing to take the hit, Greece improves its fiscal situation, reducing the interest rates for it to borrow. There is a very simple lesson in all of this, including the massive build-up of private debt in the U.S. (which dwarfs the federal debt): don't live beyond your means.
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