ATHENS: Greek debt has turned into a modern version of a nightmare from mythology in which the more the country cuts and taxes to climb the mountain, the deeper down it falls.
Twice recently the Greek government has announced a deal on new measures to unlock rescue funds before bankruptcy knocks on November 16, and twice the IMF and EU have denied this. Everything suggests that there is indeed an agreement.
But the problem lies elsewhere: it is the inexorable rise of the national debt: the country is caught in a trap.
Four years after the international financial crisis began in the United States in 2008, Greece is burdened with a far worse debt mountain than when it received a huge international bailout without precedent in May 2010 to avert bankruptcy and the risk that this would break up the eurozone.
Greece has received two rescues from the International Monetary Fund and the European Union amounting in total to about 240 billion euros ($310 billion).
Consequently its debt has soared. And the weight of this mountain is relatively bigger also because the capacity of the economy to pay its way has sagged as a result of radical action to reduce public spending.
A programme of privatisations, one of the conditions attached to the rescues and intended to raise funds to help the country while it restructures, is running far behind schedule.
The case of Greece will be a central subject when finance ministers and central bank governors from Group of Twenty (G20) countries meet in Mexico on Monday, a German source said on Thursday. In 2009, Greece had debt equivalent to 129 percent of gross domestic product.
EU rules say that a country should have a debt of no more than 60 percent of GDP or be reducing it structurally to this ratio. At the end of this year, the debt is expected to amount to 170 percent of GDP, which is in the fifth year of contraction.
The shrinkage this year, of about 7.0 percent looks more like a depression. The outlook for the debt is worse and even desperate.
"Patching things up" There is no chance that the country can meet the target set by creditors about a year ago at the time of the second rescue for a debt ratio of 120 percent in 2020.
The IMF said in its latest report at the end of October that the debt will amount to 170.7 percent of GDP this year, rising to a peak of 181.8 percent in 2013 and falling to 152.8 percent in 2017.
The IMF said that this was far too high. French economist Elie Cohen of the French CNRS research institute, visiting Greece this week to speak on a crisis of governance in the eurozone, said: "No-one thinks that Greece can repay a debt of 170 percent of GDP."
He observed: "Everyone knows that the cost of the Greek debt is going to fall on a certain number of European countries and that the public sector (institutional lenders) will have to pay."
indiatimes.com
Twice recently the Greek government has announced a deal on new measures to unlock rescue funds before bankruptcy knocks on November 16, and twice the IMF and EU have denied this. Everything suggests that there is indeed an agreement.
But the problem lies elsewhere: it is the inexorable rise of the national debt: the country is caught in a trap.
Four years after the international financial crisis began in the United States in 2008, Greece is burdened with a far worse debt mountain than when it received a huge international bailout without precedent in May 2010 to avert bankruptcy and the risk that this would break up the eurozone.
Greece has received two rescues from the International Monetary Fund and the European Union amounting in total to about 240 billion euros ($310 billion).
Consequently its debt has soared. And the weight of this mountain is relatively bigger also because the capacity of the economy to pay its way has sagged as a result of radical action to reduce public spending.
A programme of privatisations, one of the conditions attached to the rescues and intended to raise funds to help the country while it restructures, is running far behind schedule.
The case of Greece will be a central subject when finance ministers and central bank governors from Group of Twenty (G20) countries meet in Mexico on Monday, a German source said on Thursday. In 2009, Greece had debt equivalent to 129 percent of gross domestic product.
EU rules say that a country should have a debt of no more than 60 percent of GDP or be reducing it structurally to this ratio. At the end of this year, the debt is expected to amount to 170 percent of GDP, which is in the fifth year of contraction.
The shrinkage this year, of about 7.0 percent looks more like a depression. The outlook for the debt is worse and even desperate.
"Patching things up" There is no chance that the country can meet the target set by creditors about a year ago at the time of the second rescue for a debt ratio of 120 percent in 2020.
The IMF said in its latest report at the end of October that the debt will amount to 170.7 percent of GDP this year, rising to a peak of 181.8 percent in 2013 and falling to 152.8 percent in 2017.
The IMF said that this was far too high. French economist Elie Cohen of the French CNRS research institute, visiting Greece this week to speak on a crisis of governance in the eurozone, said: "No-one thinks that Greece can repay a debt of 170 percent of GDP."
He observed: "Everyone knows that the cost of the Greek debt is going to fall on a certain number of European countries and that the public sector (institutional lenders) will have to pay."
indiatimes.com
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