Greek debt in numbers and what is the solution?
Greece is in focus again, let’s see how the debt looks like in numbers by its creditors. Greek government debt stands at 323 billion euros, over 175% of the country’s GDP. About 246 billion euros was lent by other countries in the eurozone, the European Central Bank and the International Monetary Fund. But, which country has most exposure? As you can see, 27% of total loan or 56 billions euros came from Germany and it’s aproximate 700 euros per citizen. It is normal for Germany to reject any furder debt cuts, which would mean losses for its taxpayers. Btw. Greece has to repay part of the IMF loan in March and IMF has already rejected the special treatment for Greek government. But, most of the analysts expect some sort of restructuring and this is the only solution for this saga. Debt restructuring! Otherwise, the euro can expect an even bigger debacle in the market.
It is a complete tragedy. Looking at the figures there is no obvious solutions.A country as such cannot go bankrupt as Argentina has found to its costs. The only saving grace is that most of the debt seems to be owed to Governments, ECB, and IMF which would mean that they would have to follow a common course and not hold out for payment. The ECB is in a slightly different position because under its treaty obligations it cannot write-off Government debt as that would be seen as in direct funding of Governments. The reality is that Greece is unable to payoff this debt. Japan has a not too dissimilar problem with massive Government debt. However the difference is that Japan is a vibrant economy and Greece sadly is not. Greek unemployment is something like 25% with 50% among the youth and Japan is significantly below 5%. Also Japan is in control of its own central bank which has been introducing some radical action to stimulate the economy which will give it a sporting chance of reducing the Government debts. While Greece remains part of the Eurozone, it has no control over its central bank and is having to manage with policies suiting a vibrant economy such as Germany and France to a certain extent. It is almost as if Greece is in a Formula 1 race with a Trabant. Pouring in more money is not a solution as it will merely prop up a declining economy and not produce any long term solutions.
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Very nice Mr.Christopher, thanks.