Greece Wins €86 Billion In Debt Relief
Greek Prime Minister, Alexis Tsipras, has been on a relentless pursuit to resolve debt crisis since his arrival to power in January. In order for Greece to have a chance to get back on their feet, Tsipras had to find a solution to resolve the economic squeeze, reschedule Greece’s unpayable debts, and keep the country running in the eurozone. A meeting was held in Brussles on Friday where Greece was granted the 86 billion euro bailout in return for implementing tax raises, pension and other public spending cuts.
Partly prompted by the International Monetary Fund (IMF), the debt rescheduling for Greece shines a light into the past when West Germany was provided debt relief in 1953, after a meeting led by the Eurogroup.
Market Watch writer, David Marsh, raised a question for global market watchers stating, “The big question is whether, once the full generosity of Greek debt relief becomes widely known, other large-scale debtors around the world – ranging from indebted Chinese local authorities to borrowers from Ital, Portugal and Spain – will demand similar concessions from creditors.” And what a thought provoking question for all international creditors.
As part of the deal to keep the IMF as the direct underwriter, Germany insists expedience. The IMF believes the only way to keep the domestics smooth is to keep them on board, which can only be achieved if Germany asks their taxpayers to further burden themselves by extending loan repayment terms and lowering interest costs.
Germany’s Chancellor, Angela Merkel, promised German voters to maintain the unity of the euro members, avoid full-scale Greek debt restructuring, as well as keep the euro economic policies lined up with a German-style orthodoxy, as expressed by Marsh. Merkel has seemingly caved under political international pressure, where she and Tspiras are now attempting to keep their electorates in the dark concerning their principles.
According to one poll, Tsipras is currently backed by 61 percent of the electorate, regardless of a submittal to creditor demands on economic restructuring. In the elections to be held during the last weeks in September, his strategy is to consolidate political power against the more traditional parties where there is an absence in both desire and capacity to return to government.
A widespread domestic acknowledgement of resistance to creditor demands is what Tsipras is banking on for profit before tax increases and spending cuts go into effect in October. With Greek’s sly approach to winning such grand debt relief, Marsh’s big questions of whether debtors follow suit may leave creditors facing a long laboriously battle internationally.