Even without fully grasping the situation in Greece right now, it’s difficult to read the list of austerity measures being imposed on it without feeling shocked. Public workers like teachers must return wages, because the debt deal is backdated to November. The government must cut €300m from public pensions, leaving people in and approaching retirement destitute. Greece must auction its €110 billion gold reserves in the event it fails to meet targets, removing the absolute last means of funding itself when all others are exhausted. For its pains, in all likelihood Greece will be forced to return to Brussels in 12 months to request more funds, because these same demands are pushing it … [Read more...] about Is Spain set to follow Greece?
greek crisis
How much more can Greece take?
The euro has enjoyed an optimistic week. In particular, reports that the coalition in Greece has agreed a debt reduction plan with its creditors following eight long months of negotiations have boosted sentiment. From here on, Greece’s creditors will accept a 70.0% loss in the value of their existing government bonds, while receiving just 4.0% interest on the new ones. (This is a little like going into a negotiating room and not only coming out with no gains, but losing your trousers and shirt in addition. It is astonishing bondholders accepted these terms, and must reflect incredible pressure from the EU.) Of course, this is but one side of the coin. In return, Greece must implement … [Read more...] about How much more can Greece take?
Spain: Too big to fail?
The European Union’s three victims-so-far of the global financial meltdown have, not incorrectly, been described as the economic bloc’s periphery. Their economies are relatively small and, though at times worries about their debts have undermined the euro currency, their problems – even taken in combination – are hardly likely to bring the bloc to its knees. Individually, they were sick from a debilitating cocktail of similar problems: bed-ridden with debt and weak from a bad diet of profligate government spending and loan-happy banks. Nothing, it seemed, that a dose of bailout money from the EU and IMF could not cure with a trip to the emergency ward. Spain is showing similar symptoms. … [Read more...] about Spain: Too big to fail?