Tag Archives: Greek bonds

What does the eurozone deal really mean for Greece?

Illustration by Manos Symeonakis

The European Commission announced this week that it’s prepared to provide 95 percent of the funding for structural projects in Greece. Members of an EC task force are due to arrive in Athens later this month to oversee the implementation of reforms. Ministers, meanwhile, are trying to put together legislation that will convince Greece’s lenders that it is taking its role seriously.

In one way or another, these actions all stem from the deal agreed between the eurozone and Greece in Brussels last month. Even though the agreement has set in motion such a wide-ranging process, there is still great uncertainty about what the agreement on July 21 actually means for all those involved and how it will benefit Greeks. There is a sense that Greece and its eurozone partners are trying to navigate through a storm with a patchwork map and some untested instruments to help them.

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One giant leap for Europe, one small step for Greece

Illustration by Manos Symeonakis

A general rule emerged from the financial crisis that originated in the USA a few years ago: If a financial instrument is too complicated to understand, then you’d better start worrying about how safe it is. So, when one of the world’s leading economists, Paul Krugman, writes of the deal for Greece agreed by eurozone leaders on Thursday, “If you aren’t confused, you aren’t paying attention,” then perhaps we need to put the champagne on ice.

Thursday was undoubtedly a landmark moment for the European Union and the single currency. It was never an inevitability that eurozone leaders would arrive at a deal. When you have 17 leaders with 17 different electorates and myriad domestic concerns to juggle along with worries about the future of the euro, there can never be a guaranteed outcome. Nevertheless, the eurozone chose on Thursday the road to a possible solution rather than the path to an almost certain dissolution. The danger has not been dispelled but more time has been bought.

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In euro’s moment of destiny, bold may not be bold enough for Greece

Graffiti by Absent

Eurozone leaders will meet in Brussels on Thursday for an emergency summit whose main aim will be to agree on a second bailout package for debt-burdened Greece as it becomes increasingly obvious that the current system of providing interest-bearing loans to Athens in return for austerity measures and structural reforms is not viable for much longer.

The summit is shaping up as a pivotal moment in the single currency’s history because in attempting to address the Greek situation, eurozone leaders are set to adopt unprecedented measures that could pave the way for a much more radical and comprehensive approach to the debt crisis.

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How Greece inadvertently ducked under the rollover bullet

Ilustration by Manos Symeonakis

When French President Nicolas Sarkozy announced two weeks ago that French banks had agreed to participate in a rollover of Greek debt, it seemed a rare moment of relief in the country’s strained efforts to tackle its fiscal crisis. “The idea is that we won’t let down Greece and that we’ll defend the euro, which is in the interest of us all,” said Sarkozy, reflecting a sense of purpose and unity that the European Union has often lacked over the last 18 months.

However, the French proposal — which we will come to — soared briefly on the wings of hope before crashing into the immovable obstacle of reality. Two days of talks between bankers and insurers last week led to the Paris blueprint largely being discarded. However, the rejection of the French scheme appears to have helped Greece dodge a debt bullet. The more experts scrutinized the French plan, the more they realized it was a seriously flawed proposal that would worsen Greece’s debt problems.

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Et tu, Obama?

Illustration by Manos Symeonakis

Having seen the caliber of some of the Republican Party’s presidential candidates, it’s hard not to want with every fiber in your body for Barack Obama to succeed during his first term in the White House. But this week, thanks to the comments he made aboutGreeceafter meeting German Chancellor Angela Merkel, it was difficult not to feel respect for the American leader slipping away.

The headlines after the two politicians held their news conference inWashingtonrevolved around Obama and Merkel’s warning that the Greek debt crisis could bring the world economy to its knees if it’s not tackled properly. “America’s economic growth depends on a sensible resolution of this issue,” said Obama. “It would be disastrous for us to see an uncontrolled spiral and default inEuropebecause that could trigger a whole range of other events.”

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Restructuring? It’s child’s play

Graffiti by Absent

Anyone who is a parent or has looked after a small child will be familiar with the dreaded moment when a toddler tells you, “I didn’t do anything.” Once you hear these words, it’s a sure bet that you will find food on the floor, toys smashed to pieces or crayon scrawls on the wall. But it’s not just kids that employ these naively transparent methods, politicians are pretty adept at using them too.

It was, therefore, pretty easy to see through the government’s spin doctors this week as they insisted that the issue of debt restructuring did not come up at all during a meeting in Athens between Prime Minister George Papandreou and renowned financier George Soros. Visiting George did not mention the subject even once, government sources told journalists.

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Rating the rating agencies

Illustration by Manos Symeonakis

“If we really want to rub their faces in it, then the only way is to increase revenues and for every Greek to pay the taxes they are supposed to. If that happens, then we won’t need Moody’s or anybody else.” In his own inimitable style, Deputy Prime Minister Theodoros Pangalos’s blew open in Parliament on Friday an issue of public debate while displaying all the subtlety of a bulldozer trying to open a safe.

Although he was more forthright than others, the veteran PASOK politician was expressing an opinion that reflected the mood of many voters and MPs. His comments came just a few days after Moody’s, one of the three credit rating agencies that have been observing the Greek economy with the intensity a menacing stalker, downgraded Greece’s debt — already at junk status — by three notches, to B1 from Ba1 and suggested Athens would not be able to repay its debt without some form of restructuring. Moody’s also downgraded six Greek banks in the same week.

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