Greece

France calls for comprehensive debt relief for Greece

Reforms are not a must and growth doesn’t pay! Going by reports in the media, this sums up the latest proposals for the Greek case coming from the French government and the euro rescue fund, the ESM. On the one hand, very comprehensive interest payment deferrals, interest rate limits and extensions of earlier bail-out loan repayment periods are proposed. On the other hand, Greece is to be exempted from debt repayment if the average growth rate over five years falls below 2.8%. Greece could well fail to meet this target in the next few years considering the periphery country’s structural challenges, such as for example its inefficient administration and its heavily-indebted banking sector. In 2017, i.e. many years after the beginning of the crisis, the Greek economy is still having a hard time gathering momentum. At the same time, the plans from France and the ESM make no mention of…

Euro exit by Greece should no longer be a taboo

The Greek economy has been in a state of permanent stress ever since the start of the major financial crisis. Nevertheless, Greece’s economic recovery is still a long way off: Since the beginning of the crisis, the country has shed around 26 percent of its economic strength in cumulative terms. As early as 2010 Greece became reliant on assistance from its European partners and the International Monetary Fund – and no end is in sight. The financial assistance has, however, only been granted subject to certain conditions. Firstly, Greece is supposed to balance its budget and put its finances on a more sustainable basis. Secondly, the assistance is contingent on structural reforms to help get the Greek economy back on track for growth. To date, there has been no success on either front. Admittedly some progress has now been made toward balancing the budget, but there is still much to…

Greece taking measures to find its feet again

Despite a debt level which is almost unsustainable, the Greek government has switched to more offensive management of public finances. The government in Athens promised the country’s pensioners a one-off lump-sum bonus payment of up to EUR 800.00 for Christmas, after establishing that public finances are set to be on budget. As is to be expected, the Eurogroup responded to the announcement with harsh criticism. On 5 December 2016, the finance ministers of the Eurogroup had agreed to offer Greece a conversion of the country’s loan interest obligations from variable to fixed rate and to increase the average weighted time to maturity of EFSF liabilities marginally from currently 31.1 to 32.5 years. For Greece and the Greek government, the situation now is critical. Since Tsipras has already publicly promised the one-off pension payment, he will not be able to retract if he is to save face politically. At the same…