EU leaders accused of just buying time with deal
Greece will be taken out of the markets for 15 years, while most of the money they owe to banks and private investors will not have to be repaid until 2020 if the new deal works out as planned.
But their overall debt, currently standing at €360 billion, has not been reduced very much by the agreement according to a number of economists, including Sony Kappur, head of the think tank Re-Define.
He estimated that the private sector involvement amounting to €109bn “is nearly meaningless as the risks remain largely with EU taxpayers. The EU leaders have missed the boat, yet again”, he added
“Haircuts are highly unlikely under this deal, which means that the Greek debt stock is not reduced, so any improvements would be marginal. We are going to get a selective default from the changes at any rate, so it is futile not to reduce the debt stock. This is the worst outcome — it was a one-time opportunity to make Greece’s debt manageable,” he said.
Greece would need its annual growth to be more than the interest it pays both to the EU and IMF and to the private investors, but this is highly unlikely to be the case given the depth of its recession.
“This will weigh down Greece and cut their chances of growing their way out of the their problems. It is not good for Ireland and Portugal either, as Greece’s continuing problems means the spotlight will remain on the euro.”
Philip Shaw of London-based Investec Securities was more positive, saying that the lengthening and cheapening of the Greek loans will improve, but not solve, Greece’s debt sustainability problem.
Allowing European Financial Stability Fund to give cheap loans to countries finding themselves having to pay too much on the markets — like Italy and Spain currently — should help them, he said.
“Of course the crisis is far from over. And the programme is not perfect. For example, private sector involvement will result in Greece being placed into selective default,” he added.
French President Nicolas Sarkozy, however, was adamant that they had dealt with the issue of Greece’s debt, saying they had reduced its cost.
German Chancellor Angela Merkel, who spent seven hours discussing the issue with Mr Sarkozy in Berlin the previous evening, said they had taken an important step towards stabilising Greece on a long-term basis and to help them get out of their indebtedness.
MEP Marian Harkin had reservations, but of a different nature as she saw the result bringing the eurozone closer to a fiscal union.
“I have real concerns that these sweeping changes will come about, not by the will of the European citizen, but by the events that have been forced upon us by the eurozone crisis,” said the independent MEP. Fiscal union is not in any treaty, and is not what most Irish citizens expect from the EU.”
She believed that the commitment to discuss the plans for a single EU method of assessing the tax owed by companies, the Common Consolidated Corporate Tax Base (CCCTB) and legally binding rules for each country’s budgets were a clear first step on the road to fiscal union.
