The dilemmas on Greece’s debt future seem endless: Default or Not Default? Drachma or Euro? Haircut or Extensions? With terminologies borrowed from a hairdresser parlor around the corner and a bankers’ desk on the 245th skyscraper floor, the whole world is keep talking about Greece’s fiscal course: Survive or Fall.
Economists and media are divided. Some want Greece to go “default”, in proper English to “bankrupt” and “declare insolvency” and others are cool enough to realize how fatal this could be for the euro zone. At the same time and under the pressure of IMF strict austerity measures, Greeks have given their last cent to the ’cause’ – however with much less enthusiasm than the Southerners donated at the famous scene of “Gone with the Wind”. In the following years, they will be asked to donate more billions to the noble cause of paying back the loan, interest rates included. This might boost the national pride, however with unemployment current at 14% with rising tendency, I don’t know where they will get the money from.
Anyway the fierce debate is going to continue until the EU leaders’ Summit March 25-26, 2011, when German Chancellor Angela Merkel will press for a thorough euro debt crisis solution and not a Greek-tailored made one.
I have picked up the latest article about the issue, where odd enough, Greece seems to have found some allies.
The Wall Street Journal, for example, in its opinion article ” Europe Shouldn’t Let Greece Default” stresses that “The case for a stiff haircut is easy to make, but masks serious risks to the euro zone.”
Does Europe need a default? As euro-zone leaders work to defuse the dangerous debt crisis that is raging at their periphery, more and more observers seem to believe that part of the solution should be a major cut in the face-value of outstanding Greek and possibly Irish government bonds.
At first glance, the case for a stiff haircut is easy to make: The current strategy of buying time has not put an end to the debt crisis; contagion risks from a forced debt-restructuring have diminished as markets have gotten used to the idea that public debts may not be repaid in full; and some countries are said to be bust anyway. So the argument goes that the sooner the issue of public debt is resolved, the sooner markets and policy makers can move on to other issues. Advocates of a haircut also point out that debt restructuring has been part of the solution in many previous emerging-market debt crises, and it is thus a tried and tested procedure (Read Full Article Here )
Everyone assumes Greece is looking for a way to escape its debt burden, caused by over spending in the public sector, really a welfare program for the purpose of job creation. They are right. If Greece can wiggle out, it certainly will try. Not to be trusted.