The Greek Conundrum

I’ve been focused on stock price forecast models, recently, and before that, on dynamics of oil prices.

However, it’s clear that almost any global market these days can be affected by developments in Europe.

There’s an excellent backgrounder to the crisis over restructuring Greek debt. See Greece, Its International Competitors and the Euro by the Turkish financial analyst T. Sabri Öncü – a PDF from the Economic and Political Weekly, an Indian Journal.

According to Öncü, the Greeks got in trouble with loans to finance consumption and nonproductive spending, when and after they joined the Eurozone in 2001. The extent of the problem was masked by accounting smoke and mirrors, only being revealed in 2009. Since then “bailouts” from European banking authorities have been designed to insure steady repayment of this debt to German and French banks, among others, although some Greek financial parties have benefited also.

Still, as Öncü writes,

Fast forward to today, despite two bailouts and adjustment programmes Greece has been in depression since the beginning of 2009. The Greece’s GDP is down about 25% from its peak in 2008, unemployment is at about 25%, youth unemployment is above 50%, Greece’s public debt to GDP ratio is at about a mind-boggling 175% and many Greeks are lining up for soup in front of soup kitchens reminiscent of the soup kitchens of the Great Depression of 1929.

As this post is written, negotiations between the new Syrizia government and European authorities have broken down, but here is an interesting video outlining the opposing positions, to an extent, prior to Monday.

Bruegel’s Interview: Debt Restructuring & Greece

Austerity is on the line here, since it seems clear Greece can never repay its debts as currently scheduled, even with imposing further privations on the Greek population.

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