Tell us about your experiences with Marketplace. Enter To Win
Greek Debt Crisis

Why Greece has to make its payments

Heidi Moore Feb 13, 2012

Jeremy Hobson: For more on the Greek story and its impact on the financial markets, we’re joined now by our New York bureau chief Heidi Moore. Good morning, Heidi.

Heidi Moore: Good morning Jeremy.

Hobson: Well let’s talk about this bailout, because we keep saying it’s Greece that’s getting bailed out — but really, won’t Greece just take all this money that they get and give it directly to its lenders, the European banks?

Moore: That’s right. Greece has been a huge burden on the financial system. It’s borrowed an enormous amount of money from banks, hedge funds and other investors and that’s how it’s kept its economy going — but those investors will want their money back.

So on March 20th, Greece is facing a big payment: 14 billion euros. And this bailout is just purely to let Greece make that payment. If Greece doesn’t make the payment, the banks and the hedge funds will lose money, and of course, that could start a financial crisis.

Hobson: OK, so we see what’s in it for the banks and hedge funds. What’s in it for Greece, then, to take this money and make these payments?

Moore: Sure. That’s like asking: what’s in it for me to pay my credit card bill. Well, what’s in it for me is that financial companies will lend me more money in the future, and that I won’t have to pay an enormous interest rate. So, in this case, the market is ready to charge Greece 33 percent interest. The next time that country wants to raise money, it won’t be able to afford it.

Hobson: Marketplace New York bureau chief Heidi Moore. Heidi, thanks.

Moore: Thank you.

Marketplace is on a mission.

We believe Main Street matters as much as Wall Street, economic news is made relevant and real through human stories, and a touch of humor helps enliven topics you might typically find…well, dull.

Through the signature style that only Marketplace can deliver, we’re on a mission to raise the economic intelligence of the country—but we don’t do it alone. We count on listeners and readers like you to keep this public service free and accessible to all. Will you become a partner in our mission today?

Your donation is critical to the future of public service journalism. Support our work today – for as little as $5 – and help us keep making people smarter.