According to Reuters, euro zone ministers and their deputies have held numerous meetings and conference calls over the last two weeks to decide how Greek debt, seen at almost 190 percent of GDP next year, could be cut to a more sustainable 120 percent in 8-10 years.
Without agreement on how to reduce the debt, euro zone ministers and the IMF do not want to resume payments of loan tranches to Athens — even though Greece has met all the conditions — because they have no guarantee on whether the need for emergency financing will ever end.
The key question is: Can Greek debt become sustainable without the euro zone writing off some of the loans to Athens?
So far, the options for debt reduction under consideration include reducing interest on already extended bilateral loans to Greece from the current 150 basis points above financing costs.
How much lower is not yet decided — France and Italy would like to reduce the rate to 30 basis points (bps), while Germany and some other countries insist on a 90 bps margin.
Another option, which could cut Greek debt by almost 17 percent of GDP, is to defer interest payments on loans to Greece from the EFSF, a temporary bailout fund, by 10 years.
The European Central Bank could forego profits on its Greek bond portfolio, bought at a deep discount, cutting the debt pile by a further 4.6 percent by 2020, a document prepared for the ministers΄ talks last week showed.
Not all euro zone central banks are prepared to forego their profits, however, the German Bundesbank among them.
Greece could also buy back its privately-held bonds on the market at a deep discount, with gains from the operation depending on the scope and price.
But the preparatory document from last week said that the 120 percent target could not be reached in 2020, only two years later, unless the ministers accept losses on their loans to Athens, provide additional financing or force private creditors into selling Greek debt at a discount.
The latest analysis for the ministers showed the debt could come down to 125 percent of GDP in 2020, one euro zone official with insight into the talks said.
To cut the debt more boldly, the IMF wants the euro zone to forgive Greece some of the official loans, in what is called Official Sector Involvement (OSI) in EU jargon.
This is an idea that several countries, including Germany, the Netherlands, Finland and Slovakia, firmly reject.
On Monday, the biggest battle is likely to be over just that.
“OSI is at the core of the problems with reaching a deal,” one euro zone official with insight into the talks said.
German central bank governor Jens Weidmann has suggested that Greece could “earn” a reduction in debt it owes to euro zone governments in a few years if it diligently implements all the agreed reforms. The European Commission backs that view.
German paper Welt am Sonntag said on Sunday that euro zone ministers were considering a write-down of official loans for Greece from 2015, but gave no sources and a euro zone official said such an option was never seriously discussed.
European Central Bank executive board member Joerg Asmussen told the German Bild paper on Sunday that a write-down on Greek debt should not be part of the deal, echoing repeated statements from German Finance Minister Wolfgang Schaeuble who said it would be illegal.
“It will be touch-and-go if we get a deal on Greece on Monday,” a senior euro zone official said. “Euro zone countries have made concessions worth a lot of money already, so it is difficult to see how this can move even further.”
French Finance Minister Pierre Moscovici said on Sunday evening that euro zone ministers made big progress to reach a common position during at a conference call on Saturday in preparation for their talks with the IMF on Monday.
“I will go with a firm determination, with a mandate from the president and prime minister, to reach a conclusion,” Moscovici said. “We are very close to a solution.”
Moscovici mentioned the reduction of interest on bilateral loans, foregoing ECB profits on Greek bonds and the debt buy-back as the options that would need to be applied for a deal as well as additional financing for Athens to keep it funded until 2016, rather than only until 2014.
any chance of the greeks putting in a ‘good’ word for the irish if you manage to get some money from europe we could do with some !!!
hardly, hardly a chance. if we pay 5% interest rate for the money they give us as loan.
Reporter: “The key question is: Can Greek debt become sustainable without the euro zone writing off some of the loans to Athens?”
>> That is not the key question! It is just one of many questions that arise naturally around this financial crisis in the past couple of years. I think the key question that has made Greece’s creditors losing sleep at nights in the past two year is:
– “How do we (bankers/creditors) recover those money back without a loss (a tiny loss is acceptable to us. A break-even is good. A full interest is fantastic!!!)?”
Can this be achieved? Yes, I think they can, by trying the followings:
Companies such as BMW, Mercides-Benz, Siemanns electronics, ect — instead of subcontracting parts/subassemblies, low tech /low cost stuffs such as car tires, car wheels, circuit boards, wire harnessing, portable air conditioners, door hinges, car’s brake pads, bicycle frames, etc…, in china — these companies should open factories in Greece to produce it! They also should open warehouses in Greece’s ports to store raw materials (like raw rubbers to make tires) which they import from overseas, and process it right in Greece, then transporting the final parts/ subassemblies to Germany to be put in final products.
The main point is: To make use of the low cost labors of Greece these days, and at the same time, giving them real jobs that produce real/useful things for society.
To make sure things work out the way they want, these companies can send their own management teams from Germany down to Greece to supervise things, so that bribery/corruption will no longer be an issue, no more.
Under this scheme, the income taxes from Greek workers can be controlled by the troika/ECB banks if they want to. And part of it can be used to pay back those debts incurred in the past. This will stimulate econmic activities, and the money will start to circulate again. Employment will recover in other sectors of society.
Therefore, as long as there are jobs for the people, there are alway tax money to repay those debts. And over time those debts will be paid off plus interest.
Isn’t that easy!? 🙂
It is also a recipe for serfdom 21st century style.
Neither Greece nor anybody else needs the dead-end jobs these factories have to offer. This kind of job does nothing for the development of either country or individual and is largely responsible for the position industrialism has put the world in. What countries like Greece, Spain, Ireland etc need to realize is that the position they have been bullied into, no work, lots of odious debt, complete dismantling of the social and societal structure build up over the years, is not the disaaster it is accepted to be. Big problems hide big opportunities. We need to see past the problems and concentrate on the opportunities presented. Opportunities like developing proper education systems, developing sustainable jobs, developing sustainable energy sources etc. The countries are on their knees, there is absolutely no point in putting the future back into the hands of those who got us to the position we are in right now. We couldn’t count on them in the past, we certainly shouldn’t count on them for the future. As we have to start all over again, we might as well do it in such a way that it benefits us instead of Mr. BMW, Mercedes, Siemens or whoever else thinks they have the right to ruin people’s lives for their gain…
1. There are a lot of people being unemployed right now, and many don’t have enough to eat. How do you solve this urgent problem in a short period of time? Give each of them couple hundred thousand Euros would do it! But where does that money come from?
2. What I suggested in that comment of mine is just to solve this urgent situation. Once they are out of emergency mode, they will know what to do this time for their future, based on past experience. I did not suggest that that should be the way for the future, because energy resources won’t be that abundance and cheap any more.
3. If you think what I suggested won’t work or not very helpful, then what would you suggest, step by step what to do now?
4. To develop those things you just mentioned, I think, is a kind of a mini-version of a Marshall plan and enormous political will to carry it out, the kind of power like Mao Zedong of communist china once dit in the 50s and 60s. Does the Greek people have that kind of money to cary it out? And if they do, then the crisis is over by itself, no crisis at all!
5. People can keep dreaming on. But those good old days with 40k, 50k, 60k a years salaries are basically no more, even in the USA. There are still some high pay in the US but very stressful works.
Greece’s situation is a very educative experience worth observing. I’d like to how you and other people solve this problem.
Thank you for sharing your thoughts.
BTW, are you a Greek-American?
the question is addressed to whom?
If I were a Greek, before giving up and sitting idle, as a Greece citizen I would go round from neighborhood to neighborhood to find like-mined people, ask any friend of mine or any accquentance I know, to gather opinions for an immediate solution/direction, then write up a petition/letter/proposal to Greek Prime Minister/Parliament and to the offices of presidents of EU, of the ECB, of the IMF, to German’s parliament, and to Chancelor Merkel. I would also send copies to major news papers in Europe such as Spiegel newspaper in Germany.
At the same time, I would talk to close relatives, close friends, seek out those who accept my idea (that I said earlier in other comments) that is tobuy some arable land to grow crops such as potatoes, wheat, barley,…, and to raise cow/sheeps/pigs/chicken whatever, as long as it takes less cost to do and less time to do it; for example, it takes 3-4 month to grow potatos, 4-6 weeks for lettuce/cucumber/tomatos,…, and maybe 12 months for chicken, something like that.
This is the life-boat to stay off starvation. But it could yield some profit if we can produce more, we can sell part of the crops to make some bucks. Surely it is hard work, but it is still much better than just sit and wait for solution from the Government, if it ever has one.
Seriously, what is your plan for the current situation? I’d like to hear it.
we are city people with professional backgrounds with absolute lack of knowledge in farming/animal breading. Starting from this basis it’s is impossible to have a good hand in chosing the right landplot or even calculate costs for 1-2 years (buy/rent land, machines, even labourcraft, etc). and yet I checked last year and the roughly calculated cost to move to county side was immense. Money we do not have. You know, the cost of food is manageable, what is expensive are always increasing taxes and extra taxes, utilities, heating oil etc. and these one cannot avoid if one becomes a farmer.
“the cost of food is manageable, what is expensive are always increasing taxes and extra taxes, utilities, heating oil etc. and these one cannot avoid if one becomes a farmer.”
>> It’s so tough, perhaps, too tough for the people. No wonder so many have taken their own lives to escape it.
In case you have not, check the following link to see if it is something useful: http://www.resilience.org/
and it’s tougher when one has kids to feed, elderly and chronic ill to take care of, rent, mortgages, loans… then all these obligations come together and build a mountain one cannot besiege. the worst thing is the depression and I see many people going around like this.
You have again right now you’re finger on it. The items you mention as “building a mountain you can’t climb” are the very 4 basic human needs which we all should be able to access when needed. These 4 needs have been hi-jacked by the money junkies and are made availabe subject to ability to pay rather than when needed. That’s exactly what I mean when I say we need to shift from a profit based economy to a need-based economy.
If they want money, let them sell plastic replicas of He-man Samaras or so, but don’t let them hold complete communities, and the weakest within those communities, to ransom over their basic needs. Nobody should ever have to worry about having a roof over their head, food on the table, proper health care, etc. And we have, as a society, the means to ensure nobody ever will. Providing we, as a society, reign-in the money junkies.
They are allowed to ride rough-shot over everybody, and as we are finding out the hard way, they do just that, ride rough-shot over everybody to ensure their personal gain.
This is a transition period, and Greece can, if it so wishes, be the leading light and guide the way to a meaningful, socially responsible and sustainable society, with an economy to sustain a society, not the other way around.
If society becomes slave to its economy, there is something fundamentally wrong, and it needs to be fixed by society. It is simply lunacy to expect those who profit from the situation to change the situation. Why would they? They are ruled by greed, not conscience, and simply don’t see why they should not be entitled to more than others.
Absolutely agree. And it boils down to re-structuring the political/governmental system, beginning with a new constituion.
Just like an extra door to be used as an additional exit in a building in case of fire, public land (and water) must be made available to any citizen who don’t have works, and/or are seeking farm works, at minimal or no cost, and no land-tax of any forms, as long as the land are used to produce foods.
This does not mean to give the land away for free, but to lend the land to those who need it to create farm and produce food. Once these farmes become profitable, they now can pay taxes, and the country can sell the land to them if it see fit. That is what I call “the rights to land (and water)”, and people should organize a movement to demand for the right to land.
The deal on Tueday indicates that the Greek people, once more, are pushed further toward the Olduvai Cliff. Very soon, it’ll be a life-or-death situation.
I’ve been through it before, years ago, so I know how tough it is. It’s heart-breaking when one can’t find enough food for the kids or medicine for the sicked.
Yes, depression is THE mass-weapons-destruction in this kind of crisis. I use meditation to handle depression whenever it arises. Depressants and alcohol kill, so I hope people stay away from it.
the best medicine against depression is aerobic sports (swimming, jogging, dynamic walking) 🙂
With empty stomach!?… and after exercising, eat… AIR-SOUP to recover strength!? 🙂
half liter of water. talk was about depression, not starvation
Yes, the subject is about depression. And depression, or sadness, or angriness, or happiness all are states of mind. And thus, it has nothing to do with physical fitness, which has a lot to do with human body’s activities such as swiming, jogging, walking, etc….and which also only happen in normal times when foods are plenty. These days, foods are not that plenty or affordable to many. And thus, exercising without a lot of food could be a torture, instead of a pleasure.
Whereas, depression, being a state of mind, requires mental activities to help eradicate it. And meditation, as has been proven for thousands of year by masters in the East, is the most effective way to subdue it.
But one should not accept my words NOR reject it outright without first trying it out. Only by personal experience shall one knows whether it’s true or not.