quarta-feira, 4 de fevereiro de 2015

The abc of Greek debt

The Greek economy is coming out of a recession that lasted since 2009. The economy contracted about 25% and the debt soared to 175% of GDP, the equivalent of 324 billion euros, according to Open Europe and the European financial stability Mechanism.

A situation that goes far beyond the limits set by the European treaties, i.e. a debt of 60 percent of GDP.

Alexis Tsipras's Government promised to put an end to years of austerity, of "humiliation" and "suffering". The Government line worries international creditors anti-austeridade.

The European part of the rescue program for Greece ends on February 28.

Without an agreement for the extension of the programme, Greece can find financing problems and Greek banks can access the liquidity fund of the European Central Bank (ECB).

The Tsipras Government, through the Minister of finance, Giannis Varoufakis, already said he does not intend to ask for an extension. Is ready for dialogue with the "European partners", but not with the "troika" and refused the 7 billion euros of the last slice of the aid program.

But in the summer, Athens sees win about 10 billion of obligations.

After the restructuring of 2012, the majority of Greek debt, about 85%, is currently in the hands of countries, backgrounds and eurozone institutions (chart 1). Here are other creditors, such as the International Monetary Fund (IMF), Member of the "troika".

In terms of the euro zone (Chart 2), the four largest economy are the most exposed. The Germany holds more than 56 billion euros of Greek debt. Then comes France, with more than 42 billion, Italy (more than 37 billion) and Spain (more than 24 billion).

Portugal holds 1.102 billion euros of Hellenic debt.

Greece's position

The new Greek Government made it clear that he does not intend to abandon their electoral promises, namely, putting an end to austerity measures. And it wasn't long before acting.

In the first Council of Ministers, the Executive has suspended some privatization processes. Also advanced with the reinstatement of dismissed employees and increased lower pensions.

The market reaction was panic. In the first three days of Government, the Athens Stock Exchange has lost more than 15%.

Finance Minister Yiannis Varoufakis, intends to renegotiate and restructure debt, at least a part.

The Member countries of the Monetary Union, from Portugal to Italy, not to mention with the Germany, oppose a forgiveness of debt. The French Finance Minister, Michel Sapin, said: "we can discuss, postpone or alleviate, but not forgiving the debt".

On the table are therefore some solutions, such as reducing interest rates or extending the period of repayment.

In one of the countless interviews, defended Varoufakis debt repayment depending on the growth rate of the economy. And another added: "When two partners must discuss a problem there are two solutions. Sit face to face or side-by-side and but face the problem ".

The costs of a possible bankruptcy of Greece

Any decision on Greek debt will have consequences. First for European countries that benefited from international aid: Ireland, Portugal, Spain and Cyprus. These are going to be attentive to the negotiations and may require the same concessions that were given to Greece.

The situation is even more delicate since countries such as Portugal and Spain, will the votes in 2015.

In the event of bankruptcy of Greece (graph 3), countries duty bearers assume losses. In the case of the Netherlands these amount to 708 euros for each citizen. And 105 euros per each Portuguese.

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