4. Germany's Greek Gifts
This week's debt deal between Eurozone and IMF leaders is not Greek to us at all. No matter how they spin it, it's clearly a freaking default!
After weeks of tense negotiations, Greece's lenders agreed to a debt reduction package Tuesday, opening the door for the cash-strapped country to receive desperately needed new loans and, above all, keep it in the European Union. The resulting plan will purportedly slice Greek debt by more than 40 billion euros with the projected goal of cutting it to 124% of gross domestic product by 2020. Greece will receive 43.7 billion euros in four installments starting in mid-December once the deal is approved by the requisite national parliaments.
"Tomorrow, a new day starts for all Greeks," Greek Prime Minister Antonis Samaras told reporters in Athens.Hey Samaras, you stay out of this buddy! This has nothing to do with you. In fact, you weren't even in Brussels when the rest of these big-wigs were deciding your people's economic future. Maybe the next time you need money to stay afloat -- which at this pace looks to be around the 2013 German election -- you'll get a seat at the children's table if you are lucky. Why are we calling this latest measure a default even though the Europeans refuse to do so? Simple. Greece's EU creditors are lowering the interest rate on their old loans by a full percentage point, extending the maturity of the loans from the EFSF bailout fund by 15 years to 30 years and giving the country a 10-year interest repayment deferral. We repeat: 100 basis points less to pay, 15 more years to pay it and no interest for a decade. By Zeus's beard that's one heckuva deal! Try asking your banker for mortgage relief like that and see how far you get. You'll get laughed right out of your foreclosed living room. Still, our European friends apparently intend to plow on with the charade and refuse to simply forgive the Greeks their debts. German Finance Minister Wolfgang Schaeuble told the press that it was legally impossible for Germany wipe away debts while simultaneously offering new loan guarantees. Likewise, German lawmaker Gerda Hasselfeldt negated the idea of a Greek debt "haircut" now and forever. Get off it Gerda. We both know this is purely a case of semantics and your constituents surely do as well. And as for the Greek people, we are pleased they received this latest round of aid. We know times are tough there and austerity is anything but a hoot. Hopefully this will provide some short-term relief while they try and turn things around. That said, they better not get too used to these repeated bailouts. We may not be the Oracle of Delphi, but we can clearly see that they better beware of Germans bearing gifts.
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