News, Politics

How much longer can the Greek debt saga continue?

How much longer can the Greek debt saga continue?
February 10th, 2012
Author: Jeff Taylor

Every time we hear that a deal on Greek debt is about to be reached along comes another fly that sinks straight into the ointment.

Just as they saw the light at the end of the tunnel the Greek people have now been told that they can have another round of bail-out money to the tune of €130 billion as long as they fulfil another three conditions.

Number one is that they must take another €325 million in savings.

Number two Greece must quickly get the austerity package through its parliamentary process.

Number three is that there must be written guarantees before next Wednesday that the austerity package will be implemented whatever the outcome of the elections in April.

But the Greek deputy labour minister resigned in protest at what he said was ‘shameless and blackmailing tactics’ used by EU debt inspectors. This has been reinforced by the top Greek police union threatening to issue arrest warrants for members of the troika who are forcing these savings measures on the country.

Reuters and the Telegraph report that the Greek Police Federation’s top target was Poul Thomsen, the IMF’s head official for Greece.

The union announced in an open letter “As we can see you are continuing this destructive policy, so we warn you that you cannot make us fight against our brothers. We refuse to stand against our parents, our brothers, our children or any citizen who protests and demands a change of policy.

We warn you that as legal representatives of Greek policemen, we will issue arrest warrants for a series of legal violations … such as blackmail, covertly abolishing or eroding democracy and national sovereignty.


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And George Karatzaferis, the head of the far right LAOS party and part of the Greek coalition government, has now come out and said that he cannot support the savings package. “I explained to the other political leaders that I cannot vote for this loan agreement.” He said, although his party’s 15 seats within the parliament’s 300 would not stop the package being passed into law.

But as the politicians wrangle the Greek people are becoming more restive, with protesters and police clashing in the capital, Athens.

Greece has to find €14.5 billion out of its €350 billion in debt by the 20th of March so it can redeem bonds. If not then all bets are off.

The Greeks are looking at laying off another 150,000 civil servants, €3 billion in spending cuts in 2012 alone, a 20% reduction in the public sector work-force by 2015 as well as a cut in their minimum wage of 22% (even more for younger workers) to meet the austerity package requirements.

There was even talk, said the EU’s economic affairs commissioner Olli Rehn, of setting up an unprecedented separate Greek account purely for repaying debt. A move that would put serious strains on what is remaining of Greek sovereignty.

The unions have stepped in and a two day strike against the cuts has already started.

What a strange situation to be in. The EU needs Greece to have the money to stay in the Eurozone as much as Greece needs it to stay a member of the club and stay the right side of default (just).

The real negotiating question is; who needs Greece to have the bail-out most, Greece of the EU?

The fundamental question though is, are the people of Greece being forced to jump through these hoops for good economic reasons or to keep a political dream alive?

If for the former then in time Greece will recover and become a financially healthy member of the Eurozone. If the latter then we will be back here time and time again at massive cost until one of three things happens; the Eurozone caves in and just props the country up for good, the Greeks cave in and become more Germanic in their outlook on life or Greece is ejected from the EZ.

By Alun Salt [CC-BY-SA-2.0], via Wikimedia Commons

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One Response to “How much longer can the Greek debt saga continue?”

  1. Stephen Barraclough says:

    Quite easily answered. Just as the BofE has given the british banks enough to cover their Greek Bond debts, the same I guess is happening in germany and France.(The others will probably try to do much the same thing!) When Greece ‘bombs’, leaves the Euro-zone and their bonds have to be written off, it will cause the least damage to the whole of Europe’s banking system.
    Then the Euro currency nations all start praying hard that Spain/Portugal/Ireland can avoid the same fate.
    The Greeks? ………. Anyone for a cheap-cheap holiday? (Shame the airlines won’t be able to afford to refuel there..)