Archive for November 2012
This blog started about a year ago. One of the first posts that I wrote was on the topic of Greece’s debt sustainability after the troika report was leaked ahead of the Brussels summit of October 25th. The Greek situation has not made much progress since as here I am again about to write about Greece’s debt sustainability.
Early on Tuesday morning, the key EU and IMF players announced in a press conference a new set of measures that intend to bring Greece’s debt trajectory under control by 2020.
The main points, a reduction to the interest rates of Greece’s bilateral loans with eurozone countries that were part of the first program, the extension of the maturities of those loans by 15 years, a deferral of the interest payments to EFSF by 10 years, the return of the profits on bonds purchased under the SMP via the national central banks and a re-purchase program of Greece’s privately held new government bonds after the PSI.
Last Thursday I had the privilege to participate in a conference in Rome, organised by Friedrich Ebert Stiftung and Fondazione Giacomo Brodolini on the topic of “Keeping Europe Together: Pathways to Growth in Southern Europe”.
Aside from the fact that it is not very often that us Greeks get the chance to be part of a discussion that has Greece and growth in the same sentence, it was enlightening to hear the views of other fellow Europeans, most importantly to get the German view on the crisis that is not necessarily reflected in the rhetoric and decision making of the current German government.
A great experience overall, here is what I said about Greece (first published by the Social Europe Journal).
“We either vote for these measures or we face chaos” a phrase that Greeks have heard repeatedly since Spring 2010 when the country was locked out of international markets and became evident that it would need a combined financing package from the European Union and the IMF.
The Greek Parliament in May 2010, in June 2011, in February 2012 has been asked to vote for austerity bills under the pressure of a tranche disbursement and in the name of saving the country from default and chaos. The perpetual dilemma of ‘survival’ resurfaced, only this time it came from Antonis Samaras, a fierce adversary – while in opposition – of the policy mix that the troika has been prescribing for Greece. In his speech in Parliament, he urged the coalition MPs to vote for the heaviest austerity package since Greece entered the EU/IMF program, while reassuring that this will be the last cuts that Greece will have to tolerate.
Two days after the Greek Prime Minister made the surprise announcement that the negotiations with the troika are completed; his finance minister submitted on Wednesday to Parliament the draft budget for 2013.
The Greek coalition government, with very little room to meet its pre-election pledges of re-negotiation of the terms and changes to the subscribed policy mix, presented a budget that goes even against the recent rhetoric of the IMF that heavily frontloaded fiscal consolidations have a damaging effect on economic activity and hamper any efforts of recovery.
The approximately 9.5 billion euros – 4.5% of GDP – of austerity measures that the government plans to implement next year are reflected on the revised macroeconomic framework where the recession in 2013 is now seen at 4.5%, more in line with the recent IMF research findings that 1% of fiscal consolidation translates into 0.9% to 1.7% of economic output. The 183 billion euros of GDP projected in 2013 brings Greece’s economic output back to 2004 levels.