The Last Words on Greece

The deal is done, Europe saves Greece and we are now witnessing the death of the Greek Civilization. Did they teach about this in Ancient Civilization courses at University?  I hope this is the last article I have to write on Greece for several months at least.

After more than 12 hours of negotiations, the 17 nation eurozone made up of countries that use the euro have reached an agreement to loan Greece €130 billion in additional bailout loans to save it from a potentially disastrous default next month.

The negotiated agreement is expected to bring Greece’s debt down to 120.5 per cent of gross domestic product by 2020 – which is about the maximum that the International Monetary Fund and the eurozone consider sustainable. This only works if Greece finds ways to grow, it is more likely a miracle and in the near future we will most likely see Greece default due to lack of growth and revenues, not due to excessive spending.

The euro surged to the 1.33 level as the news of a deal was released. The accord should take some pressure off the 17-country currency union that has been battling a serious debt crisis for two years. Now moving, Spain, Italy and Portugal to the front of the line with their hands out.

Without the deal, Greece was facing a potentially default next month and possibly being forced from the eurozone.

In the end, the country’s private creditors were asked to take substantially more losses on their holdings than previously anticipated, cutting Greece’s debt by an estimated €107 billion. There are other terms in this agreement that are yet to be made public. There are rumors of interest rates being tied to growth and other promises from the EU and ECB.

“It’s no exaggeration to say that today is a historic day for the Greek economy,” said Greek Premier Lucas Papademos, who rushed to the meeting to lend weight to his country’s pleas for help.

Jean-Claude Juncker, the prime minister of Luxembourg who also chairs the meetings of eurozone finance ministers, said Greece’s private investors – mostly banks and investment funds – have been asked to take a face value loss of 53.5 per cent on their bonds.

On top of that, Greece’s public creditors – central banks and the eurozone countries – also agreed to give Greece a break on its debt.

The eurozone countries will cut the interest that Greece has to pay for its first package of bailout loans to 1.5 percentage points over market rates from between two percentage points to three percentage points currently, cutting both its debt load and limiting the need for new rescue loans. This creates a major problem as Ireland and Portugal have already signaled that they want to renegotiate their bailout loans to match what Greece is paying.

At the same time, the European Central Bank and the national central banks in the 17 countries that use the euro will also forego profits on their Greek debt holdings, again reducing the costs for Greece.

EU economic affairs commissioner Olli Rehn says Greece’s new compliance with the terms of a new bailout will be ensured by a separate account containing enough money to service its debt for three months. This sounds like a bankruptcy filing anywhere else.

That close monitoring was demanded by some members of the eurozone who are frustrated that Greece has not always enacted painful reforms and budget cuts on time.

The EU has saved Greece finances but beat the Greek people down in doing so, aren’t the people more important than money.