Greece avoids a messy default… for now
Adriene Hill: After months of wrangling and a marathon meeting yesterday, European finance ministers have agreed on a $170 billion plus bailout for Greece. That’ll save the country from a messy default, but stability can be hard to get too excited about, for Greeks and banks that owned Greek bonds — especially with the harsh terms of the agreement.
For more we go live to Marketplace’s Stephen Beard in London. Good morning.
Stephen Beard: Hello Adriene.
Hill: So let’s start with the Greeks — what’s this mean for them?
Beard: On the plus side, it means they avoid a messy default next month. They get, as you say, new loans worth about $170 billion to tide them over. On the downside, they have more deep public spending cuts: a 22 percent cut in the minimum wage; and job losses in the public sector of around 150,000; and what many Greeks regard as the humiliation of permanent EU/IMF monitors in Athens making sure they comply with all these conditions.
Hill: What’s it mean for the investors that hold Greek bonds?
Beard: They lose a lot of their money. They write off about $140 billion worth of old Greek government bonds. They take a hit of about 75 percent on their holdings. Pretty bad, but better than a messy default in which they might not get anything.
Hill: And what about for Europe? What’s it mean to the eurozone?
Beard: For the eurozone, it means for the time being, at least, the euro has been saved. But not everybody is happy about this. I mean, the main creditor country, Germany, is going to put this through its parliament next week — this package of measures — and there’s likely to be vociferous opposition. The finance minister recently called Greece a “bottomless pit.”
And there’s real bitterness in Greece itself. Constantine Michaelos of the Athens Chamber of Commerce, says the people can’t take any more austerity.
Constantine Michaelos: Social upheaval, social explosion is very near. And then we continuing with austerity upon austerity.
And analysts point out, there is an election in Greece in April, which could produce a government which could renege on the whole deal.
Hill: From our European desk, Marketplace’s Stephen Beard. Thanks.
Beard: OK Adriene.
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