Europeans demand a new vote that Athens austerity plan before you pay the money to repay its creditors. Otherwise, Greece will default on its debt. With a risk of chain reactions throughout the euro area. Thousands of "outrage" expressed Sunday, June 19 against the austerity of Syntagma Square in Athens.
Pressed to act quickly Friday by Nicolas Sarkozy and Angela Merkel, the finance ministers of the euro zone agreed Sunday night to complete the fifth installment of the loan of 110 billion made a year ago. The payment of this installment of 12 billion euros, financed by the EU and the IMF, however, is strictly conditional on the adoption of a new austerity plan in Greece. By putting the pressure on Athens, the euro area is playing with fire.Persistent fear of a shipwreck Greek also continued to weigh on European stock markets Monday and bank stocks. Here's what could happen in the coming days, ahead crucial for the events.
Greece rigor vote
The Greek Parliament has to decide June 28 on the 2012-2015 multi-year budget plan, which provides further savings measures, to 28.4 billion euros, and a wave of privatizations expected to report 50 billion. The announcement of the new austerity plan and the fear of selling off of many state enterprises have attracted strong popular protest, forcing the Prime Minister George Papandreou to reshuffle his team. The purse strings are now held by the man of experience and a politician Evangelos Venizelos. To lock his fragile majority, George Papandreou will first undergo Tuesday in a vote of confidence from Parliament.Despite some defections within his party, Pasok, he should win both races – the socialist majority in effect holds 155 seats out of 300. Athens also expressed "confidence" in the adoption of the austerity plan in Parliament.
Thus, nothing precludes the payment of EUR 12 billion as expected by Greece to meet its repayment schedule in the short term. In the longer term however, the situation in Greece remains a concern. The country's debt amounted to 340 billion euros, more than 150% of GDP. Despite a reduction of six points of its deficit in 2010, Athens has not regained the confidence of the markets which require it of interest rates long-term record of nearly 17%. This is why the euro area has decided to grant an extension of a hundred billion euros to cover the needs of the country by 2014.The outline of this new financial assistance plan should be finalized at the next meeting of the Eurogroup, on 3 July.
Finally, if European leaders manage to agree on the terms of the loan. Berlin in fact requires banks and other private creditors involved in this new aid. Which may be likened to a default or event of credit rating agencies and thus panic in financial markets. The solution seems to be emerging now is that of a "roll-over" of the Greek debt. In financial jargon, this means that creditors when loans mature, replace them "voluntarily" by others of the same amount. But whatever the solution, the question of the ability of Greece to repay its debt remains. The crisis is far from over.But this is not the austerity measures that will boost domestic demand. On the contrary …
Greece refuses rigor
Even if the government succeeds in passing Papandreou's new austerity plan in Parliament, it is not certain that the population accepts it. The announcement of the budget plan has already led hundreds of thousands of Greeks on the streets for two weeks. And mobilization is unwavering. Thousands of "outraged" have yet shown Sunday on Syntagma Square in Athens. Nearly half of the Greeks want the release of the new Parliament austerity plan developed by the government for a new international aid and avoid a collapse of public accounts, according to a poll published in the Sunday edition of To Vima. For political analyst George Sefertzis Greek, the street will not drop weapons as the government will not be dropped.The country plunged into political chaos serious right-wing opposition with no more favor in the eyes of the Greeks that the socialist majority in power.
In such a scenario, the EU and the IMF have said they therefore would not pay the 12 billion planned, and Athens could not repay 2.4 billion euros owed to its creditors on July 15 this year. This means that Greece will default on its debt. A paradox because the loan refusal would trigger what the Europeans fear most. This raises the question of the reality of the threat. The Belgian Finance Minister Didier Reynders, in fact, compares the failure of Greece to that of Lehman Brothers. "If Greece was the first to default, then the looks would turn to other countries such as Ireland, Portugal, Spain, Italy, Belgium can be but also France," says it in an interview with La Tribune on Monday.
According to the specialist markets Georges Ugeux, a default of Greece would extend to all private and public debt of the country, far in excess of one trillion euros. This would cause the immediate collapse of Greek banks, so depositors and businesses. What would happen then to Greece? An output of the euro area would be inevitable in order to enable the country to devalue its currency and to win quickly in price competitiveness. Except that again, it would not be without consequences for the euro area. AAA-rated countries such as Germany and France, the ECB should recapitalize to the tune of at least 190 billion, injecting massive amounts into money markets and save the German and French banks. But beyond the cost of the event, the very survival of the euro area would be threatened.
Wednesday, August 3rd, 2011
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