A tough bargain took place yesterday in Brussels at the meeting of the Eurogroup leaders and Greek Prime Minister George Papandreou came out at 2:30 pm with a content smile on his face. At the following press conference he stressed that Greece managed to achieve its goals.
Loan repayment extension of 7,5 years on the average – i.e. the last loan tranche will be paid back 10 years later in 2023.
Loan interest rates reduction – from 5,2% at 4,2%.
Goerge Papandreou said that with this deal “Greece won 6 billion euro form the interest rates reduction.” Furthermore, he spoke about Greece’s commitments saying that ” the measures adopted by Greece in order to consolidate the public finances, include structural changes, privatization and exploitation of public assets of 50 billion euros, which would “ease back Greek people’s debt by 20%. ”
In the CONCLUSIONS OF THE HEADS OF STATE OR GOVERNMENT OF THE EURO AREA OF 11 MARCH 2011 it is said:
Greece to rigorously continue structural reforms, increase capacity building for their
implementation, fully and speedily complete the € 50 bn privatization and real estate
development programme it has announced and to introduce a strict and stable fiscal
framework with the strongest possible legal basis to be decided by the Greek
government;
However a few question marks are raised here: As the decisions were taken by the Eurogroup, I assume that the Greek deal refers to the 80 billion loan given by the European Union and that the IMF loan of 40 billion euros are excluded form the deal. IMF borrows money with 3% interest rate, right?
Another problematic issue is the agreement on the Euro Pact and the Competitiveness Agreement that will strangulate wages and pensions and will raise taxes. Will this mean that Greeks will face new austerity measures?
It’s also not quite clear, how the “50 billion euro until 2015”-provision will materialize. The Europeans speak of “sale of state assets”, the Greek government of “exploitation of state assets”. That’s a difficult task to reach given the national sensitivities.
Given the fact that the meetings in Brussels ended in the early morning hours, let’s give them more time to explain what exactly is all about.
Meanwhile I hope the Greek government will proceed to structural changes as soon as possible and that they will include radical reducing of the costs the state pays for wages. A public sector of 750,000 civil servants and almost 500,000 employees at the state-run enterprises for a country of 10,000,000 citizens?
Furthermore they state has to “kill” bureaucracy in order to reduce corruption options and boost the development. Otherwise I see no foreign investors step a foot here…
And last but not least to curb tax evasion. Oh the state can stuck into jail one or two of big tax evators and some politicians who enriched themselves by impoverishing the people.
Radical changes mean first of all that the state give up its ‘nation’s employer” mentality.
