A Dose of Reality:
- If Greece borrows money from the IMF/EU which means that they have more debt now than they did before they defaulted then they are worse off and not better off as they have a larger debt.
- If Greece has an additional $107 billion in debt that has not been accounted for because it is not in the name of the Hellenic Republic but is guaranteed by the Hellenic Republic then how are they going to pay off this debt?
- If the goal of this entire exercise was to reduce Greece’s debt to GDP ratio to 120% then how will a larger debt accomplish this as it is fiscally impossible.
- If the “real REAL goal” was to pay off the European banks so they wouldn’t default then Europe has accomplished this goal but at a terrible cost to Greece and to the Greek people.
Delaying Greece’s debt restructuring by more than a year reduced banks’ potential losses as firms trimmed their holdings and most of the risk shifted to European taxpayers.
“This is a horrible deal for the EU taxpayer,” said Raoul Ruparel, chief economist at Open Europe, a London-based research group. “The longer we wait for these restructurings, the worse the deal gets for the public. There’s an ongoing risk transfer from the banks to the taxpayers.”
The new borrowing -- in effect, replacing private with public debt -- will amount to 78 billion euros, according to the EU, leaving the actual relief from the swap at 59 billion euros. Greece also will need to draw money from a second, 130 billion- euro EU and IMF rescue fund to repay other private debt and finance the government’s budget deficit.
That will leave Greece’s debt at 161 percent of gross domestic product at the end of the year, 4 percentage points less than the current level, according to a March 11 report by the European Commission. The ratio probably will return to 165 percent in 2013, the commission said.
When all IMF and EU loans promised to Greece are disbursed, 66 percent to 75 percent of the country’s debt will be held by the public. In 2010, before the first bailout and before the European Central Bank started buying its bonds, Greece had about 310 billion euros of debt, all held by the private sector.
If Greece has to restructure again, or defaults, taxpayers will be on the hook.Anyone that can't see the European Monetary Union is a Kleptocracy and in full self destruct mode [whilst its citizens get royally screwed], deserves what's coming to his/her investment holdings.
“The swap doesn’t achieve debt sustainability for Greece,” said Nicola Mai, an economist at JPMorgan Chase & Co. in London. “Debt relief going forward will have to come from the public sector.”