After the collapse of talks earlier in the week, matters have been resolved so that Greece will submit a list of reforms designed to manage the debt issue and avoid deeply unpopular austerity measures.
Some commentators say that the extension of the bailout is a victory for Germany, but the state of play is more complex than that. If Greece did default, and walked out on the EU, the damage to Greece would be severe, but the damage to the EU would be massive, too. There would be no winners if negotiations fail.
The Wall Street Journal is running an article which says “Greece can pay its debts in full, but won’t”. This rather interesting perspective relates to the fact that Greece has more than enough assets to cover the debt. The WSJ makes the point that nations, including Greece, have in fact managed sovereign debt as required by the stipulations of the bailout before.
What’s notable is that in the past Greece didn’t have Germany demanding massive cuts. The German position may be “rational”, but it’s not logical. The projected payouts, against a shaky revenue base, aren’t trivial.
“Assets” involve another mindset the Greeks aren’t likely to consider – Sale of assets means selling assets which would be worth more later. Debt payments for the foreseeable future also don’t appear to include any closure of the debt.
The projected payments seem to be like a national credit card, there to cost the country money forever. WSJ has a graph of payments to 2042, but 25 years of debt?
I’ve been of the opinion that the Greek and other EU debts are the equivalent of the old Third World debts. These loans were made by adults. Lenders who lend irresponsibly are no better than irresponsible borrowers.
A few questions:
1. As for corruption, is the EU taking the position that it is free from corruption?
2. If so, how were these ruinous loans approved?
3. How did the loans become so unmanageable that drastic measures were required?
4. Who made money out of the loan approvals?
5. Why is the EU pretending that all faults lie with Greece?
This isn’t over. Either sanity prevails, and the loans are made manageable, or chaos. The choice is a lousy situation that should never have happened or a worse situation that shouldn’t happen.
