Euro zone, IMF reach deal on long-term Greek debt

Comments (14)
ALALAYIIIAAAA wrote:

they could have done it at the begining without making a whole country suffering poverty, so ,i smell a rat here.

Nov 26, 2012 1:51am EST  --  Report as abuse
scythe wrote:

(quote) because they have no guarantee on whether (Greece’s) need for emergency financing will ever end

sums up the situation

and any Greek OSI debt write-off will have to be paid for by taxpayers in other countries

who will then no longer accept any further OSI loans to Greece

so the negotiators are having to find a solution that convinces the taxpayers that continuing sovereign welfare payments to the Greek government has a purpose ….

Nov 26, 2012 3:37am EST  --  Report as abuse
Abulafiah wrote:

Yes, they could, but the next question is why should they?

The bottom line is that the Greek government cooked the books, and lied to the banks to get credit. Try doing that to your bank and see if they agree to write-off the debt.

I agree with you that making the general population suffer for the corruption in government amounts to collective punishment, and the spending cuts being forced onto Greece are making a bad situation worse, but I can also see the banks point of view that they are under no obligation to pay Greek debts, which is what a write-off amounts to.

Nov 26, 2012 3:50am EST  --  Report as abuse
stambo2001 wrote:

We know what happens if the citizens of the world do not repay the banker class; they lose their right to self determination. But what happens to the ‘lenders’ if they do not get their imaginary ones and zero’s back? Understand the question? Why is one class of human being allowed to print money for the other class of human being to use? Remember, fiat money is not attached to any ‘thing’ of value anymore. Understand? The concept of currency has morphed right before your eyes and you don’t even know it. Your eyes are widely shut.

Nov 26, 2012 5:25am EST  --  Report as abuse
ALALAYIIIAAAA wrote:

come on skythe you can’t have said that.you are just playing to the gallery that’s all.everybody knows that ecb bought the greek bonds at the 25% of the initial value and demands from greece the whole amount plus 4,5% interest.writting off 50% remaings again with profit estimated at 25% +4,5% interest.
your analysis is for childish.nevertheless you got absolutely right about the so called tax payers because they are also kids and their politicians are populists to the bone.food for BILD readers.

Nov 26, 2012 5:46am EST  --  Report as abuse
Abulafiah wrote:

stambo2001 wrote:
“Remember, fiat money is not attached to any ‘thing’ of value anymore. Understand?”

Prove that you understand. Explain why you think currency should be attached to a ‘thing’ of value.

Nov 26, 2012 7:42am EST  --  Report as abuse
KDupre wrote:

The idea of making those that work hard and smart and then succeed pay the way of those who are unable or unwilling to fend for themselves is a very dumb idea that hasn’t worked in ANY COUNTRY THAT HAS TRIED IT.

As you can see in the EU right now they’ve run out of other people’s money!

The USA is more than $16 TRILLION in debt and the stupid politicians can’t figure out what happened. This country will be the next one to fail.

Nov 26, 2012 9:10am EST  --  Report as abuse
ALALAYIIIAAAA wrote:

KDupre@
You are playing to the gallery.You are implying that greeks do not work hard.i was wondering why german companies would hire them by hundrends .
answer the question first and then revise your speculations.

Nov 26, 2012 9:32am EST  --  Report as abuse
dareconomics wrote:

In the first part of this post (http://dareconomics.wordpress.com/2012/11/24/sustainable-greek-debt/), I noted that troika projections of future Greek GDP growth had become more generous over time in order to maintain the illusion of a “sustainable” 120% debt to GDP ratio being achieved by 2020. Today, I would like to examine how these unrealistically rosy projections are hiding the certainty that Greece will default on its debt. The Greek bailout talks today are merely advancing a cynical plot by the German government to delay the default so that it may secure victory in upcoming elections.

From Zerohedge, note the highlighted areas in the chart below:

After bottoming out in 2014, Greece isexpected to average over 4% growth for eight years in a row. To place this in context, economic powerhouse Brazil has only averaged 3.18% growth over the last 20 years. This forecast materially affects all the numbers in the troika’s assessment.

Here is Greece’s recent performance:

Historical Data Chart

The country has not grown at even a 1% in years. If we change Greece’s growth rate to 2% per year from 2014 to 2022, a more realistic picture of Greece’s debt to GDP ratio emerges. Using the standard compound growth formula, Greece’s GDP rises to only €222bn by 2022. This means that Greece’s Debt to GDP ratio will be 132% in 2022, all else being held equal.

However, all else will not be equal. If we reduce Greece’s revenues in line with the reduction of GDP growth, the government will lose about €20bn in tax revenues over the period in question. Adding that to Greece’s debt in 2022 makes €314bn euro in debt divided by the GDP of €222 gives us a whopping 141% ratio.

My assessment is more realistic than the troika’s but still very optimistic. There are only two conclusions that follow from this data. Either Greece will default, or it must become permanent ward of the troika with permanent financing being provided by the Eurozone and ECB with occasional grants to cover shortfalls. I really do not see the northern tier agreeing to make Greece its dependent; hence, the country will be allowed to default at a time when it is convenient but not until after German elections.

Full post with charts here:

http://dareconomics.wordpress.com/2012/11/26/part-2-sustainable-greek-debt/

Nov 26, 2012 12:57pm EST  --  Report as abuse
sw19 wrote:

The problem with PIGSI is that they have structural problems in their economies. Historically, they were never strong economies, earlier in the 20th century. Since joining the EU, and then the Euro-zone, they have had access to easy money. Even Italy did not really qualify as a founder member of the Euro-zone; they massaged figures to meet the 3% government deficit limit. The consequences of the current crisis, with its roots in US sub-prime mortgages, and derivatives based on them, have led to a weakened European economy, in particular, exposing the weaknesses in the design of the Euro-system. This is exemplified by the Target2 flows from Spain and Italy to Germany. At present, it does not appear that the EU, Euro-system and ECB are equipped to tackle the crisis. Over 20 summits have led to no clear way forward. In other words, they are fire-fighting, not re-designing the Euro-system.

Nov 26, 2012 2:12pm EST  --  Report as abuse
DeanMJackson wrote:

The article reads, “Its economy has shrunk by nearly 25 percent in five years.”

Yet prices haven’t fallen! Why? Because of the European Central Bank’s (ECB) low “stall mode” interest rate policy. Interesting how the ECB and the Federal Reserve continue similar interest rates polices that DON’T WORK. So why would a known policy failure be the policy?

Ladies and gentlemen, until interest rates are allowed to increase to their market-oriented levels, which is way higher than they are now, there can be no recovery, as all economists know. Interest is expected future profit. Low interest = low profit = little investment. High interest = high profit = greater investment. If there is no expected future profit, there won’t be investment, hence there won’t be a recovery.

People save more for investment when interest rates are relatively higher, NOT when the rates are low. If rates are high, people will restrict present consumption for the grater future consumption that investment offers, which the higher return on savings (higher interest rate) makes possible. That isn’t too hard to understand, is it? So why do you think the politicians on both sides of the Atlantic Ocean are doing their best to maintain Western economies on “stall mode”? Anyone out there know the answer?

Of course, when interest rates do rise there will be the natural “correction”, where malinvestments/bad dept are cleared from the economy, allowing the general price level to reach its REAL lower level. Can’t have investment when no one knows what the real general price level is! THEN, after the correction, those high interest rates, commensurate with higher rates of return on investment, will see greater investment, because naturally people like getting better returns for their savings/investments, don’t they?

Ladies and gentlemen, it’s time to throw out the political parties that are destroying our economies in the West in order to encourage fewer Western dollars going to China’s massive military buildup. All that ludicrous policy says is that the West is in panic mode and doesn’t know what it’s doing. China and her ally the USSR could care less about the West’s stupid policy. Why? Because they’ve naturally compensated for it long before the West intentionally imploded its economy. You see, Communists also have brains and are known to come up with contingency plans/strategies.

Nov 26, 2012 5:42pm EST  --  Report as abuse
Pavlov wrote:

Might as well call it “Santa Claus” funding.
Greece is either going under or there will be a massive Government overthrow: “Even the lowly mouse will turn and fight once cornered…” Shakespeare.

Nov 26, 2012 5:57pm EST  --  Report as abuse
VonHell wrote:

The idea of the eurozone members writing down the greek debt is err “interesting”… it is something like: you take the taxpayer money of your country, lend it to Greece and later say: you dont need to pay me back…
Why not just donate the money then?… ops i forgot… we are capitalists and we need the illusion the greeks will pay back with interest…

And what surprises me is the fact Lagarde backs this idea… so why does not she simply write down the IMF money she is lending to Greece too?
mmm maybe because the creditors(countries that came with the money from their taxpayers) will turn mad and want to eat her liver with some fava beans and a nice bourdeaux… and the institution will loose all credit, reputation, respect…
If the general public was not so alienated… the protests would be much more interesting… tshhhhh

Nov 26, 2012 6:39pm EST  --  Report as abuse
Abulafiah wrote:

A better idea would be for the ECB to lend money to member states instead of the commercial banks doing it.

Contrary to what the right-wing fanatics in the USA keep bleating, there is no debt crisis in the EU. What they have is an interest-rate crisis. While sovereign currencies such as GBP are borrowing from state banks at fractions of a percent interest, Spain is being charged 7% by commercial banks. *That* is the crisis; not the level of debt.

I am sure it has very little to do with anything, but the number one lender is the German banking industry…

Nov 27, 2012 7:21am EST  --  Report as abuse
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