By: Dr. Mike Campbell
Many analysts are expecting that Greece to default on her debts eventually. Politicians across the EU and within Greece deny that a default is just a matter of time. The Greeks point strenuously at the austerity measures that they have put in place already, with more to come, and at plans to sell off state held assets to raise funds.
The Greek Prime Minister, Mr Papandreou, survived a confidence vote last week and has urged fellow politicians to act in the national interest in passing a further, critical round of austerity measures tomorrow. If the Greeks pass the legislation then the Eurozone members will release the next tranche of EU/IMF bailout funding (€12 billion) which will allow Greece to avoid an immediate default. If the Greek parliament decides not to approve the new legislation (which is naturally deeply unpopular with Greek citizens) then Greece will be unable to meet her obligations and a sovereign default will have become a reality.
Trade unions have called a 48 hour general strike to protest against the austerity measures, but alternatives seem to be mighty thin on the ground right now. If Greece manages to pass the austerity measures, a second EU/IMF package is likely to be agreed. It is suggested that the magnitude of the second package will be similar to the original help at €120 billion. In another development, France has said that its banks will help Greece to meet its obligations by extending the time that the country has to pay back debts to them. The new offer would allow Greece up to thirty years to pay down debts which will be provided as new lending when existing bonds mature. French banks are the most heavily exposed to Greek debt, so the move is self-serving as much as altruistic. As they say, “watch this space…”