The facts of the situation are already well known. Greece has received long-term loans from the EUROZONE which should be repaid on a regular basis together with the interest due. This now appears to be impossible because the country is bankrupt and 30% of its workers are unemployed.
The EUROZONE cannot accept to write-off the 245 Billion Euros Greek Debt. This would become a precedent which could ultimately destroy the EURO as a world currency !
The newly elected Prime Minister of Greece, Alexis Tsipras, promised electors to reorganise Greece and to restore its pride, which quite logically costs money ! As an election promise he threatened to withdraw Greece from the EUROZONE if it did not agree to a hefty Debt write-off !
The speculation now is that repayments of the Debt could be postponed (but for how long ?) and that only a reduced amount of the current interest falling due would be paid by Greece !
This, theoretically, would enable Mr Tsipras to reorganise Greece and would not endanger the EURO ! Angela Merkel would not be obliged to change any of the fundamental rules of the EU which are enshrined in Treaties !
Mario Draghi, President of the European Central Bank (ECB), has in the meantime introduced a new policy of buying-up short term Bank debt in the EUROZONE so as to provide finance to banks which could then make loans to Industry ! This should help to Kick-start industrial activity !
Are there not some evident risks in these plans ?
What happens if Alexis Tsipras reorganises Greece but the economy does not perform as expected ? Will he then not want to withdraw Greece from the EUROZONE by adopting the drachme and never repay the Loans ? Likewise, if Mr Draghi floods the world with too many EUROS will this not create a spiral of inflation ?
Will it not be the taxpayer who will ultimately bear the cost from the loss in value of the EURO in his pocket ? That would be like a hidden tax on his wealth !
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