Deal Reached on Greece's debts

Tani Coyote

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http://news.bbc.co.uk/2/hi/europe/8587847.stm

France and Germany have reached a deal on a financing plan to help debt-laden Greece, which will include IMF help.

Officials in Brussels say the package - yet to be agreed by other eurozone states - will total 23bn euros (£21bn).

The French presidency said there would be "very precise conditions" under which the 16 eurozone countries "could be led to intervene" to help Greece.

Co-ordinated bilateral loans and IMF loans are envisaged. EU leaders are now poised to discuss the plan.

News of the deal broke as leaders of the 27 EU member states gathered for a two-day summit in Brussels.

Diplomats say the eurozone leaders may hold an additional meeting on Thursday evening to discuss how to help Greece.

So far the eurozone has avoided seeking an IMF loan for Greece, preferring a European solution and anxious to maintain global confidence in the euro.

Revision of rules?

Earlier on Thursday Germany's Chancellor Angela Merkel said the German government "will press for emergency aid combining IMF and joint bilateral aid from the eurozone but... only as a last resort".

She has signalled reluctance to offer Greece anything resembling a bail-out, which is not allowed under the single currency rules.

She said Greece was not insolvent, was acting to curb its deficit and was still able to raise money on international markets.

She also said she would press for the EU to amend its treaties to strengthen its ability to prevent future budget crises.

Stressing the need to learn lessons from the crisis, she wants a treaty change to allow sanctions to come into force should a eurozone country ever default on its debts.

Arriving at the summit, Greek Prime Minister George Papandreou urged EU leaders to act to stabilise the euro.

The euro hit a 10-month low against the dollar on Wednesday after a credit downgrade for Portugal, which is also struggling with heavy debts.

Greek austerity drive

Greece's woes have exposed fundamental disagreements about how the 11-year-old euro project should work, the BBC's Europe business reporter Nigel Cassidy says. The eurozone's governance will have to be re-examined, he adds.

A deal to help Greece could prevent the crisis sapping market confidence in the euro and ease fears of contagion in the eurozone.



EU members Hungary, Latvia and Romania have received emergency loans from the IMF and EU as their budgets have been hit hard by the global economic downturn. But, unlike Greece, they are not in the eurozone.

The Greek crisis is not formally on the agenda of the summit, which is officially concerned with the EU's 10-year economic strategy, and reinvigorating international negotiations over global warming.

But, says the BBC's Oana Lungescu in Brussels, it is Greece that is on everybody's mind.

German taxpayers are fiercely opposed to bailing out Greece, which is burdened by debt of nearly 300bn euros (£267bn, $407bn) and a public deficit of 12.7% of GDP - more than four times the official eurozone limit.

Greece has enacted unpopular measures to curb its deficit, including a freeze on public sector wages, pension reforms and increases in fuel taxes.

It is also having to refinance its debt. Because of doubts over its ability to pay, it is having to pay interest at about 6% - around double what Germany has to pay.

As a casual observer of European affairs, I have noticed that a lot of people seem to get on Greece's case because of its current financial issues, some going so far as to even say it was a mistake to allow them to be part of the Euro.

So for Europeans, what are your thoughts on this? Good idea? Bad idea?
 
And people complain about the US debt. Just look at these European countries. USA #1.
 
Well, well, well... They've finally allowed the IMF to get involved... If only they'd done that 6 weeks ago, this whole "crisis" would never have escalated this far in the first place :rolleyes:
 
As a casual observer of European affairs, I have noticed that a lot of people seem to get on Greece's case because of its current financial issues, some going so far as to even say it was a mistake to allow them to be part of the Euro.

So for Europeans, what are your thoughts on this? Good idea? Bad idea?

The euro and the ECB should die. Not making loans to Greece wold be good because it would hasten that.
 
Greece has received the first tranche of a 110bn-euro ($136bn; £94bn) loan to help it overcome its debt crisis, the European Union has said.

The European Commission said 20bn euros from the EU and the International Monetary Fund had been drawn on.

The bail-out package for Greece - which has an 8.1bn-euro bond repayment due on Wednesday - was agreed earlier in May.

On Monday, eurozone finance ministers insisted the euro was still credible despite its slide against the dollar.

The European single currency fell to its lowest level against the dollar since 2006, amid concerns that debt problems will undermine Europe's recovery.

On Tuesday it recovered some ground but remained under pressure, trading at $1.2335. It was broadly unchanged against sterling with one pound buying 1.165 euros.

Tax scandal

The 20bn-euro loan is made up of 14.5bn from euro area member states and 5.5bn euros from the IMF. It is the first time Greece has tapped the funds.

In return for the loan, the government in Athens is trying to make major austerity cuts - a move which has outraged the public and led to violent clashes in the capital.

In a separate development on Monday, a tax scandal led to the dismissal of Greek Deputy Tourism Minister Angela Gerekou.

She was forced to go after a newspaper revealed that her husband, a popular singer, owed more than 5m euros in unpaid taxes and fines.

Ms Gerekou, a political protegee of Prime Minister George Papandreou, had filed joint tax declarations with her husband for years.

http://news.bbc.co.uk/2/hi/business/8688620.stm

And so it begins...

I can't imagine how PO'd some of the Europosters here must be.

Well, I wish Greece the best, even if I get the feeling many Europeans are going to hate them for a long, loooong time for this. The story of the body and the stomach comes to mind; maybe Greece actually does have a good role despite appearing to be a burden?

As an outside observer, I imagine the fact Greece has to be bailed out has raised considerable questions about the country's membership, and indeed, the exact role of the EU... have anti-EU sentiments been inflamed by any chance by this loan? (Thankfully a loan and not a grant; that would REALLY anger people I'm sure)
 
First thing I did when I read that earlier today, was to google picture search that woman. I wasn't disappointed.
 
As an outside observer, I imagine the fact Greece has to be bailed out has raised considerable questions about the country's membership, and indeed, the exact role of the EU... have anti-EU sentiments been inflamed by any chance by this loan? (Thankfully a loan and not a grant; that would REALLY anger people I'm sure)
I have the feeling most people in Germany don't even know that it's in fact a loan.

From the people I have talked to, no one really advocates on excluding Greece from the Eurozone or refusing to help them. It seems to have come through that every other action would be counterproductive for all Euro nations themselves.
What REALLY angers people is the Greek's apparent ungratefulness. The protesters are most likely only a vocal minority, but still: everyday you hear new stories about Greek corruption and welfare paradises, and when Greek newspapers but all the blame on Germany because it demands they have to cut their 13th and 14th month salary (!!) while paying their taxes to rescue them from total bankruptcy, I can understand that people start asking themselves "why exactly are we doing all this?".

I don't think all this translates into true anti-EU sentiments. And all political parties (except the socialists, but they've always been contra-EU) avoided populistic campaigns on that issue.

The support for harsher rules in this cases are widely supported, though, and I personally hope for the future stability of the EU that Merkel is succesful in changing the respective regulations.
 
Well it's a loan, so why not? And if helping Greece will help to keep the euro afloat then sure, why not (if Greece falls, the rest of the eurozone might suffer, that's why were helping Greece)

BTW, according to wikipedia, in 2009 the US had a dept of 86% of GPD, and it is estimated to rise to 98% in 2010
 
Of course the Eurozone should help Greece. As Sarkozy said, otherwise what's the point in it?
 
Does debt as % of GDP matter at all though? Japan has a national debt of 192% yet noone seems to worry about them. Someone explain?

People are worried about Japan's debt. However, the fact that Japan's economy is overall stronger and its government is overall more stable mitigates that somewhat. Also, in Japan's case, this is a situation that has been building for over a decade in a more or less steady progression. It's not a sudden crisis. But Japan does have problems. And people who are involved in international finance do watch it.
 
I'm wondering what implications all of this is going to have for the ECB.
 
Japan's debt is primarily owned by Japanese citizens and entities. This is just the opposite for Greece where this turns out to be a great deal for Hypo Real Estate of Germany which holds €7.5 billion of their debt.

BTW, total panic move by Germany on short selling today.
 
People are worried about Japan's debt. However, the fact that Japan's economy is overall stronger and its government is overall more stable mitigates that somewhat. Also, in Japan's case, this is a situation that has been building for over a decade in a more or less steady progression. It's not a sudden crisis. But Japan does have problems. And people who are involved in international finance do watch it.

About how high would it have to get to be an issue for the USA? (Well, its an issue, but, I mean, like Greece.)
 
This situation has generated lots of talk about a finance market tax and other regulations. Anyone willing to bet on that happening? I think I'm going to eat my keyboard if anything of the sort actually goes through.

The bailout caused a bit of a row in our parliament, when the opposition said they wouldn't accept the proposal because it didn't bind the banks in any way to the rescue operation. The government made a big noise about how "a deal had been reached with the finance industry", with a minister shouting in the parliament and waving a paper that "had it all in black and white".

Then a journalist went and digged up that deal. It basically said that the FI will commit to the bailout, unless it gets terribly inconvinient.

Somehow I have a feeling that this is going to fall mostly on the taxpayers. I do think that rescuing Greece is necessary, I just hope that some sort of central budget control won't be the only concrete measure taken to prevent further bullpies like this.
 
"Debt as a % of GDP" is a measure roughly equivalent to "Mortgage as a % of annual income" isn't it?
 
The rest of Europe is next. :evil:
 
I have the feeling most people in Germany don't even know that it's in fact a loan.

If I recall, a lot of our bailout money over here was loans as well. People still batcrap insane about it, however(then again, it didn't help small businesses, so I can understand).

It seems to have come through that every other action would be counterproductive for all Euro nations themselves.

Indeed, a collapse of state A could mean the collapse of State B, which eventually could carry over to the USA if it became severe enough. The domino effect just gets worse and worse.

What REALLY angers people is the Greek's apparent ungratefulness. The protesters are most likely only a vocal minority, but still: everyday you hear new stories about Greek corruption and welfare paradises, and when Greek newspapers but all the blame on Germany because it demands they have to cut their 13th and 14th month salary (!!) while paying their taxes to rescue them from total bankruptcy, I can understand that people start asking themselves "why exactly are we doing all this?".

Unfortunately, it's a fact that no matter how much you do, there will always be selfish, ungrateful bastards the world over. Doesn't matter who the benefactor is; people are just selfish.

I don't think all this translates into true anti-EU sentiments. And all political parties (except the socialists, but they've always been contra-EU) avoided populistic campaigns on that issue.

Well at least that prevents the collapse of the European economy... which as mentioned above, would probably factor into a collapse of the American and other economies sooner or later. A 16 billion dollar economy crashing can destroy the world economy, go figure.

Well it's a loan, so why not? And if helping Greece will help to keep the euro afloat then sure, why not (if Greece falls, the rest of the eurozone might suffer, that's why were helping Greece)

The domino effect and such. It's arguably in America's interests too to keep Greece and Europe from collapsing.

BTW, according to wikipedia, in 2009 the US had a dept of 86% of GPD, and it is estimated to rise to 98% in 2010

Any particular reason for bringing that up? :confused:

Japan's debt is primarily owned by Japanese citizens and entities. This is just the opposite for Greece where this turns out to be a great deal for Hypo Real Estate of Germany which holds €7.5 billion of their debt.

So Japan is just like us.. or how we used to be, at least.

Doesn't take a genius to see the foreign policy implications being indebted to foreign nations can have, of course.

Since you seem to be in the know about international finance... is it possible that Greece collapsing could impact all of Europe, and possibly even the United States?

The rest of Europe is next. :evil:

Amerika über alles! :D
 
The domino effect and such. It's arguably in America's interests too to keep Greece and Europe from collapsing.
Whole Europe is not collapsing now, is it? AFAIK it's mostly the southern European countries that have trouble with their debt. Besides, if EU will help Greece, maybe the investors will lay off PIIGS, thus preventing domino effect. If this crisis does however spread, I find it rather hard to believe that Europe would help all of PIIGS (Greece is rather small compared to Spain or Italy)

Any particular reason for bringing that up? :confused:

See Karalysia's post (second post in this thread)

Arwon said:
"Debt as a % of GDP" is a measure roughly equivalent to "Mortgage as a % of annual income" isn't it?

Well sort of, though it's not exactly the same.

E: Now that I think about it, it's not the same at all, is it? The US government only gets a fraction of the nation's GDP, and almost all of it goes to running costs etc. In fact, the US is making more debt, so paying it all back wouldn't be easy.
 
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