Home' Trinidad and Tobago Guardian : February 5th 2015 Contents FEBRUARY 2015 • WEEK ONE www.guardian.co.tt BUSINESS GUARDIAN
INTERNATIONAL | BG19
Greece wants a break from
the terms of its eurozone
bailout loans, saying
they re suffocating its
Germany, the biggest backer of two bailouts
worth 240 billion euros (currently US$271 bil-
lion), says Athens must pay what it owes.
The two sides, debtor and creditor, are dug
in and posturing.
Yet analysts think a negotiated compromise
over the coming weeks is possible---though
far from certain. Greece could yet run out of
money and leave the euro.
A Greek exit from the euro --- or "Grexit"---
would unleash more turmoil in Greece. Its
effects on the eurozone and global economies
are less clear. The eurozone has new safeguards
to stabilise markets, but some experts think
"Grexit" would disrupt Europe s fragile econ-
omy and permanently undermine confidence
in the 19-country currency union.
Time is pressing: Greece s bailout pro-
gramme ends on February 28. Rather than
seek an extension, Athens wants to scrap the
entire deal and agree on a new one by May.
Without the bailout money, Greece will
default on its debts as they come due this
year. That could cause the European Central
Bank to cut off financing to Greek banks. And
that in turn could force the Greek government
to reintroduce its own currency so it could
print money and bail them out.
Here are the main sticking points, and pos-
Greece s new left-wing government elected
January 25 says its debts are so big that real-
istically cannot be paid back.
Greece is being required to cut spending
and raise taxes to pay down debt. But that
has hurt the economy in the meantime---
unemployment has soared to 26 per cent and
the economy has suffered a plunge similar to
that of the US in the Great Depression of the
Greece s debt amounts to 176 per cent of
annual economic output this year. Most of
that debt---nearly 80 per cent---is owed to the
people who bailed it out: the other European
governments, the International Monetary Fund,
and the European Central Bank.
Creditor countries---led by Germany, the
eurozone s largest member---have publicly
opposed debt forgiveness. First of all, it s tax-
payer money. More than that, economists say
that if Greece is allowed a break, the other
euro countries that had to be bailed out---Ire-
land and Portugal, for instance---would be jus-
tified in asking for relief, too.
Though eurozone states are against writing
off the loan amounts, Douglas Renwick, senior
director at Fitch Ratings, says they are "rea-
sonably likely" to grant Greece easier repayment
terms. That could mean lower interest rates
or longer repayment dates. Whether that s
enough to make Greece s debts sustainable is
hard to say, but it might settle things for now.
Greece has already received some breaks,
including longer repayment, lower interest,
and a return of profits made by the European
Central Bank on bonds it holds.
On the other hand, if talks break down and
Greece defaults and leaves the euro, it s hard
to see how it could repay its debts to its euro-
zone partners with a devalued new curren-
The new Greek government wants to ease
back on the amount of spending cuts it is
required to make in exchange for the rescue
Under its bailout agreement, Greece is being
asked to run budget surpluses--- that is, not
counting interest payments on debt---of 3.0
per cent of GDP this year and 4.5 per cent in
2016. The previous Greek government had
reduced the deficit by cutting pensions, firing
thousands of workers, and raising taxes.
Yet all those cutbacks weighed heavily on
the economy and fueled popular resentment;
a major reason Syriza won last week s election
with a promise to reject the deal and seek
One possibility is to let Greece run a smaller
surplus before interest payments. That would
still represent substantial progress compared
with 2010, when its overall deficit hit a gigantic
12 per cent of GDP.
Syriza s programme calls for rehiring gov-
ernment workers. But it remains to be seen
how far they will go. "It s not as if the gov-
ernment is rehiring everyone who lost their
job," said Renwick. "It doesn t sound the death
knell of the negotiations."
In fact, much of the painful cutting has
already been done by previous Greek govern-
ments, under creditor pressure. "The end of
austerity was upon us anyhow," Renwick said.
While it has made progress slashing its
budget, Greece has made slower progress in
making its country a better place to do busi-
So-called structural reforms include reducing
unnecessary paperwork and red tape, removing
protections for individual professions, improv-
ing notoriously slipshod tax collection and
Syriza has proposed rolling back some pro-
business reforms. They want to restore cuts
in the minimum wage, bring back a 13th month
of pension payments, reinstate employee pro-
tections and lift restrictions on collective bar-
Creditors may not give much ground here.
Some structural reforms can slow the economy
temporarily but should pay off in the long
turn. Syriza has talked about making the rich
pay more in taxes and tightening collection;
that could be common ground with creditors.
to the debt
Dutch Finance Minister and Eurogroup
President Jeroen Dijsselbloem, left,
accompanied by Greece's Finance Minister
Yanis Varoufakis, right, during a joint news
conference following their meeting at the
Finance Ministry in Athens, Friday, January
30, 2015. Dijsselbloem who chairs eurozone
finance meetings says there is no decision so
far on what to do after Greece's current
bailout programme runs out at the end of
next month. (AP)
A Greek flag flies outside the Athens Stock Exchange, Tuesday, February 3, 2015. Greek stocks
led a European market rally Tuesday on indications that the country's new radical left
government is advocating a more palatable version of its brash demand for massive debt
forgiveness that had horrified bailout creditors and investors. (AP )
Greece, the eurozone:
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