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Greek Debt Crisis

European finance ministers close to agreement on Greece

Stephen Beard Feb 20, 2012

Sarah Gardner: While the U.S. takes the day off, Europe’s busy trying to save Greece. Again.

Waiting for the Greek bailout deal has been a bit like watching a soap opera: a lot of delays; deadlines that have come and gone; ultimatums issued and then ignored.

Well finally today, the long-awaited deal seems imminent. A meeting of finance ministers from the 17 countries that use the euro is apparently about to approve a new package of loans for Greece.

Joining us from our European Desk in London is Stephen Beard. Stephen, it’s good to talk to you.

Stephen Beard: Good to talk to you, Sarah.

Gardner: Now last week, you reported the news about Greece in the form of poetry, and I was very impressed. And I was wondering how are you going to top that today?

Beard: Well, I could burst into song, but I won’t. You don’t really know whether to laugh or cry over this crisis, Sarah. I was in Athens last week, and frankly, it is bizarre. You’ve got people parading up and down outside the parliament with posters of Angela Merkel, the German chancellor, with a Hitler moustache, dressed up in a Nazi uniform. And they’re screaming ‘Fascist! Fascist!’ — but at the same time, saying, ‘Could you send us some more money, please?’

Gardner: Right.

Beard: But at the same time, away from the protests, this is serious, no doubt about it. Ordinary Greek people are suffering from the recession and from the austerity, which they say is fueling the recession.

Gardner: So lay this out for us, Stephen: What exactly is the deal on the table today?

Beard: The Greeks are being offered a write-off of some $130 billion of their debt, and they’re being offered new loans worth $170 billion, so they can pay interest on and roll over some of the remaining debt, so they stave off default over the next two or three years. In return, they’ve been asked to deliver some very painful cuts in public spending and economic reform, so they don’t get into the same mess again. And for example, among those reforms, a 22 percent cut in the minimum wage and 150,000 job losses in the public sector.

Gardner: Given that, what are the odds that this deal is going to go through?

Beard: There’s going to be mayhem in financial markets if it doesn’t, because investors have been betting heavily on this going through, and with some encouragement — the Germans, the Greeks and the Italians and the IMF all expressed confidence today and said the deal will go ahead. But then the Dutch finance minister popped up today with this suggestion that there should be permanent supervision of Greece’s public finances.

Jan Kees de Jager: When you look at the derailment in Greece, which has occurred several times now, it’s probably necessary. Some kind of permanent presence of the troika in Athens. Not every three months, but more on a permanent basis.

Gardner: Boy, I’ll bet that will not go down well in Greece.

Beard: That is absolutely anathema for the Greeks. I mean, the final humiliation — having foreigners controlling, in effect, their finances. And if the Germans and others insist on it, it is a potential dealbreaker.

Gardner: If the deal does go through, can we finally stop worrying about Greece, Stephen? Does that mean that this is the end of the Greek debt crisis?

Beard: No, not at all. If it does go ahead, it gets Greece off the hook for a month. It allows them to pay interest and roll over debts in March, but the Germans and the Dutch and others are insisting that thereafter, the money will only be paid out in drips and drabs depending on whether the Greeks carry out all the cuts and the reforms. And these are fantastically unpopular in Greece, and there’s a general election in April. So a new government could easily come to power, easily tear up this agreement and it would be back to square one. So no, the Greek debt crisis is far from over.

Gardner: Marketplace’s Stephen Beard. Stephen, thanks a lot.

Beard: OK, Sarah.

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