Tag Archives: greek bailout

Huge Protests Inspired by Suicide of Greek Pensioner – How Much More Can Greece Take?

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A 77 year old Greek pensioner took his own life outside the Greek parliament building on Wednesday morning. Retired pharmacist Dimitris Christoulas shot himself in the head with a handgun. In a suicide note, Christoulas linked his tragic act to the country’s economic crisis. In the note found by his daughter he wrote, ‘I have no other way to react apart from finding a dignified end before I start sifting through garbage for food,’

The act immediately sparked widespread sympathy and anger. An impromptu anti-austerity rally was launched on the same day and there were clashes with police. Police clashed with around a thousand protesters for a second day on Thursday. Some were blaming politicians and EU leaders for the death. The protestors chanted, ‘Killlers!, Killers!’.

Christoulas is thought to have attended anti-cut protests the previous year and has been described as politically active. Sympathisers called his actions, ‘A clear political act … he was giving his life to change the situation’.

Suicides in Greece have doubled since 2009 having previously been the lowest in Europe. Greece is struggling to cope with the heavy austerity measures which have been forced upon in by the bigger European economies in exchange for bailout funds.

Already the recent bailout is looking like a distant memory. As I mentioned in an earlier article  it was extremely disappointing that EU leaders did not attempt to solve the problem once and for all. Already we are getting suggestions that a third bailout will needed. The Greek growth predictions are extremely optimistic given the levels of austerity it will need to bear. Yields on the new Greek PSI bonds (the bonds investors were forced to swap their existing holdings for) have soared to over 21% in the last couple of days.

As the actions of Christoulas show, the EU leaders and economists, have underestimated the Greek people. There is only so much the Greek people will take. The real crunch point is likely to come in June when cuts worth about 7% of GDP are expected to be announced. How much more will the Greek people take?

My guess is that we are close to the breaking point. Christoulas’s tragic act may be the symbolic trigger which sets everything off. One of the major issues Greece faces (which people often forget) is that Greek banks, pension funds and other Greeks hold most of the Greek government debt. This is why some in Greece are so reluctant to leave the Euro. Nevertheless something will have to give.

 

 

The Latest Greek Bailout – The Worst Decision Possible

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It always happens with politicians, you get ‘compromise’. And it’s exactly what’s happened with the latest Greek bailout. Rather than the much needed bazooka to deal, with the problem we’ve ended up with the usual indecisive and ineffective compromise, which only results in a short term solution.

If politicians had just had the guts to commit a bit more support we might have had a real resolution. As it is Greece is left mired in uncertainty. It is extremely likely a further bailout and/or default will be needed.

Even under the optimistic baseline scenario of the current deal Greece will still be at a debt to GDP ratio of 129% by 2020. That’s 8 years away and still well above the 120% considered unsustainable.

And what reasons are there for thinking the baseline will come true. Greek growth was far worse than expected last year at -6.1%. Greece has never been able to successfully implement the required reforms in the past. If Greece misses its growth targets by just 1%, a scenario which seems highly possible given Greece is expected to grow by a rosy 2.3% in 2014 (despite severe austerity measures), all other factors being equal Greece will have a debt to GDP ratio of 159%. Virtually the same as it has now! And if Greece doesn’t return to growth the consequences don’t bare thinking about. One bad number in the next 8 years would knock everything of course.

This bailout will not offer any confidence for business. The Greek people are already furious. How will they be after another 8 years of severe austerity with no or little progress on debt? Even if they achieve the baseline and get back to 129% debt to GDP they are still left in a dire position.

Once again the policy makers have found the worst option. Short term thinking politicians are pandering to their electorates and only thinking of their upcoming elections.

To set a date for default, take ownership of the problem and leave the Euro would have been a better option for the long term for both Greece and the Euro.

Even better a bigger bailout designed to knock Greek debt to GDP ratio back below 100% would have inspired confidence. Businesses would not be so afraid to invest. Greece might have even been able to sell some of its assets to the private sector for a reasonable price. This was an affordable solution. Unfortunately the German tax payer and others refuse to pay.

At some point either the Germans or the Greeks are going to say enough is enough. NO MORE BAILOUTS. It is likely that Greece will default again and leave the Euro anyway. But instead of doing it now and beginning the recovery we must drag on with the worries of Greece weighing on growth and confidence throughout the whole of Europe.