Greece financial crisis | Latest : Deal reached with even tougher conditions for Greece.

DEAD7

DEAD7

Veteran
Supporter
Hall of Fame
Joined
Oct 5, 2012
Messages
50,967
Reputation
4,416
Daps
89,058
Reppin
Fresno, CA.
Greece will implode without a debt reduction

Late Wednesday night, Greece's parliament approved the bailout package presented by Prime Minister Alexis Tsipras.

The deal is far worse and more austere than what the nation voted against in the bailout referendum on July 5. Not only has the Syriza-led government agreed to numerous extremely austere measures, such as further pension cuts and labour reforms, it is also being forced to chop up and sell 50 billion euros-worth of the country to the private sector so it can recapitalise the battered banking sector.

While Tsipras can now begin working with Greece's European creditors to get an actual bailout and funding back to the Greek economy, which has basically been shuttered for the past two and a half weeks, this does not solve the riddle of how the country will keep on borrowing and adhering to conditions for the long-term.

People are still going crazy over the IMF's recent damning report on Greece's bailout deal — the one the nation is being forced to swallow — because it confirmed that the beleaguered country cannot go on like this.

It's stuck in a vicious circle. Greece's debts are way too high to maintain, and the country has no money to pay its debt back. So it needs to borrow additional money from its creditors to keep going. In turn, however, it has to excavate the country's assets, dismantle its market structure, and implement spending cuts to help put the country in a better financial position. But those cuts hurt economic growth, making Greece's new debt way too high to maintain ... and the cycle begins again.

Also, because Greece is in the monetary union, it's not in the interest of the creditors to stimulate the economy too much, because doing so could cause inflation in countries such as Germany.

The IMF called Greece's debt "highly unsustainable" for this reason and highlighted:

  • Debt will peak at about 200% of gross domestic product in the next two years, not the 177% that was thought last year.
  • Debt will also fall more slowly. The IMF wanted it down to 142% of GDP by 2022 but now expects it to fall to just 170%.
  • The IMF had expected Greece to spend less than 15% of its GDP on debt servicing, judging this to be sustainable but "highly vulnerable." Now that's out of the window, and payments will be much higher.
Tsipras can celebrate Thursday morning that parliament approved the debt package, but as Business Insider's Mike Bird, as well as a raft of analysts, pointed out Wednesday, no one really thinks Greece's bailout plan will be a success. In fact, it is expected to fail miserably because of this debt conundrum.

Nomura's chief economist, Richard Koo, said in a note on Tuesday that the EU refused "to acknowledge mistakes made" and "refused to accept responsibility for this collapse" in Greek economic output, and he said the negotiating positions of both the IMF and the EU were based on "highly unrealistic" assumptions.
 
heisenburrr

heisenburrr

Have Fun Staying Poor
Joined
May 5, 2012
Messages
5,775
Reputation
270
Daps
5,021
Special Report: The man who cost Greece billions

Until a renovation a few months ago, a portrait of Che Guevara hung outside Tsipras' office in Syriza headquarters in Athens. "At 16, I read Marx and believed capitalism would end and we would go to the next stage of society, which is socialism. To me, this was absolute," he said in a 2008 interview with student paper Schooligans.
Click to expand...

:mjlol:
 
You must log in or register to reply here.
Top