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And there has been a second quasi debt-hair-cut in 2013 relating to the 142 billion € bailout
loans from the ESM Bailout fund, which looks like this: Deferring most of the interest
payments on such loans until 2022, and requesting no instalment repayments until 2022.
increasing the average maturity of such loans by 15 years to 30 years; with the last repayment
instalment to be made after 45 years, in 2057.
lowering the interest rate on such loans by one full percentage point to now only libor plus 50
basispoints, which presently makes an interest rate of 60 basis points only.
The total amount of this preferential treatment, expressed in present value, is
47
billion €, and
a second quasi debt-hair-cut, at the expense of the European taxpayer.
In spite of this, the present Greek government debt level is again at 1
77
% of GDP, and way
beyond the Maastricht criteria of 60 % of GDP.
Many believe, that Greece cannot shoulder and service this debt level, and that another 3 rd
debt haircut will be necessary. In the case of Greece, 2 handicaps are coming together:
One, the government over-indebtedness.
Two, the lack of competitiveness of the Greek economy in the globalised world market.
Usually, the market reaction to this would be, that the domestic currency of Greece, formerly
the Drachma, would be weakening, there would be a devaluation of the currency, which
would then at least remedy part of the insufficient competitiveness in the world market.
As Greece is not having its own currency any more, therefore, what is called the external
devaluation of the Greek currency, and of Greece, is not possible any more.
Therefore, the only way out of the dilemma for Greece, is the so-called internal devaluation,
meaning the lowering of costs of production in Greece, among which the most important one
is the lowering of wages in Greece.
This as everybody knows, and as everybody sees now, is tough to do. But with fairness, we
should remember, that Greece, after joining the Euro, excessively increased its wages and
other categories of costs, including the costs of an inefficient government and tax
administration, and it is itself and alone responsible for having lost its international
competitiveness.
So again, what remains to do, is the inner devaluation for Greece, as have successfully done
the Baltic States, and to some degree as well Ireland and Portugal.
But the new Greek government refuses to do so, it refuses to do the reforms, which the
donating countries are requesting from Greece, and which the preceding government was on
the way to carry out.
IAFEI Quarterly | Issue 29 | 15