November 27, 2012
Whenener a Eurogroup is convened and dealt with the public debt of Greece, during the last two years, there is a statement that depicts a positive, yet painful, result: that Greece will continue receiving financial support from the troika no matter what the long-term consequences of this support will be. This time, as in many previous ones, what Greece and the Eurozone achieved was nothing more than the prolongation of a period of recession and stagnation.
The compromise achieved between the member-states of Eurozone refers to four major components:
a. 1% reduction of interest rates of Memorandum of Agreement No. 1 (signed on May 2010).
b. Postponement of loans repayment from Memorandum of Agreement No. 2 for 15 years and the relevant interest rates for 5 years.
c. Partial attribution to the Greek state of the gains the ECB has profited after buying Greek bonds in low cost. The dividends acquired from this transacton, while being attributed to member-states according to their contribution in ECB’s budget, will therefore attributed to Greece.
d. Announcement of a possible repurchase of Greek debt, a debt that was re-issued after the haircut through PSI. The ECB is inteded to rebuy it.
These are the four components of the compromise between ECB, EC, and the IMF. Greece will receive 44 billion euro as agreed in order to recapitalize Greek banks and pay third parties. No provision for growth, no provision on whether or not the debt is viable.
Basically, the Greek debt crisis is turned to be an issue that deals with the comflicting interests of IMF’s Head Christine Lagarde and German Chancellor Merkel. Lagarde wants the haircut of the Greek debt so that it can be viable (i.e. yet it is unclear what viable means), and from the other side Chancellor Merkel wants to delay the haircut, or any other policy other than loan-fueling, before Germay’s national election next year. Therefore, IMF and Germany are more concerned for the Greek debt than Greece itself. Reaching this conclusion, it is apparent that the Greek government has no influence or policy plan in the discussion for its debt and it is railed on a track of mechanic acceptance of whatever fits to the interests of third parties.
Greece will finally receive the 44 billion euro package, but this is another part of a puzzle of deadlock for the Eurozone and Greece. In the months to come, Greece will be found in an ever worse position being faced with structural and growth problems. Eurogroup’s political compromise is meaningless and lags a real political solution for Eurozone altogether.Dimitris Rapidis