By: Dr. Mike Campbell
The Eurozone finance ministers gave their approval to a further €130 billion package to prevent Greece from a disorderly default last week, but the deal required approval from the parliaments of the Netherlands and Germany to go ahead, in addition to moves by the Greeks themselves.
The German parliament ratified the agreement yesterday. In the end, the margin was more than comfortable with 496 parliamentarians voting for the approval of the deal and just 90 opposing it. However, an opinion poll of Germans conducted for the Bild newspaper found that a majority (62%) was opposed to further help for Greece. Germany has to provide the largest single contribution to the bailout fund of all the Eurozone members. Even German Interior Minister, Hans-Peter Friedrich suggested that Greece might have been better off if encouraged to leave the Euro – a position hotly disputed by the Greek leadership who told their people that however painful the latest austerity measures would be, it would be much better than the situation facing the country if it seceded from the Euro.
The Greeks, for their part have put together a debt reduction package for their creditors which would see a write-down on their debt which would work out at 53.5% and knock €107 billion off the debt mountain. Unsurprisingly ratings agency Standard and Poor’s has reduced Greece’s credit rating still further (it is already considered to be of “junk” status) in response to the move which is a technical default (at the very least). S&P, paradoxically, said that the Greek rating may be revised upwards once the debt reduction package has been agreed. The move follows a similar measure by Fitch’s last week. The reaction of the government was muted: "This rating does not have any impact on the Greek banking system since any likely effect on liquidity has already been dealt with by the Bank of Greece," the finance ministry said in a statement.