Are you wondering what is really going on in Greece?
If you had a little brother who asked for (yet another) loan and you knew he couldn’t pay back what he’d previously borrowed, even if he took this next instalment to the track and won the trifecta, would you agree to keep on lending? Or would you hope that some ‘tough love’ and the prospect that hitting rock bottom might cause the shake up he needs to take control of his finances, and do what was necessary to turn things around?
The EU family may be feeling that they have a similar decision to make about little brother Greece, but to cut him off completely and stand by watching him struggle is not a likely decision, nor is there a bookie in Europe brave enough to handle the wager it would take to clear Greece’s debt of 320 billion euros.
The creditors have met, coinciding with the week that Greece defaulted on a 1.5 billion euro repayment to the IMF, and a ‘family intervention’ of sorts demanded that further support would be offered only if Greece could demonstrate a serious commitment to repaying its debts. So on July 6, the Greek Parliament passed the austerity measures needed to receive a further €86 billion loan from the EU.
Greece has agreed to increase taxes, close loopholes to reduce tax evasion and reduce incentives for early retirement (one in five Greeks are 65 or older!) while also raising worker contributions to the pension system. And they have agreed to the privatisation of many businesses, including electricity transmission, to generate revenue and reduce union corruption.
These and other austerity measures apparently satisfy the lenders and salvage Greece from the brink of bankruptcy yet again, having also survived in 2008 and 2012 when deadlines for loan repayments were not met. The same list of creditors had come together to try to set a path for Greek economic recovery, but in actual fact these prior attempts to assist Greece only revealed that little brother was in far greater debt than had been disclosed. Between 2001 and 2009 Greece had taken out unsustainable loans in an attempt to sustain GDP growth, to avoid precisely the kind of economic contraction they have since experienced. The luxurious work-life balance embraced within Greek culture simply doesn’t balance the books.
So, rather than a final solution of any kind, the situation yet again has come to this –
The EU and the IMF have accepted the Greek President’s signature on a document that accepts the need to cut government spending and increase revenue although the subsequent access to further borrowings does not even cover the interest on upcoming repayments for funds already owing. But after three weeks of forced closure the banks have reopened and the Greeks are finally able to access their own accounts, although there will be strict daily limits.
So life for the Greeks and the rest of Europe can return to (somewhat) normal until a likely early election will set the tone for the future management of the Greek economy, and there is negligible impact on the rest of the world, except of course if you happen to have a little brother living in, or with a business in Greece. There may be further requests for a personal or business loan, and may I suggest you point him in the direction of the nearest turf club. That winning trifecta may be the only chance you get to see your money again.
