The debt to the debt…
Turning back time, one will realize that since 208, all major problems in Greece stem from the consequences of the excessive debt. We were lead to early elections in…
Turning back time, one will realize that since 208, all major problems in Greece stem from the consequences of the excessive debt.
We were lead to early elections in September 2009 under pressure from the consequences of managing the excessive public debt.
Due to the foolishness of the newly-elected Papandreou government we left the markets in the winter of the same year and agreed to the oppressive rescue package in May 2010.
Later in October 2011 we turned t the medium term program and the costly PSI because the debt was not sustainable.
The Papandreou government collapsed under pressure from those decisions and Lucas Papadimos was took charge of managing the crisis.
In spring 2012 and after the PSI was complete, Mr. Samaras pursued elections with the intention of forming a solid government to manage the hard decisions entailed in the medium term program and the banking sector restructure in particular.
The election results from May 2012 were not the best for the parties that wished to take advantage of those premature impressions of saving the country. The policies that had previously been implemented superseded all other impressions.
A second election in June 2012 was needed for a viable cooperative government to form.
Since then a lot has happened. The country has balanced its fiscal problem, carried out reforms, regained part of its credibility and returned to the markets; the excessive debt problem however persists and appears to influence things in Greece.
The terms and extent of the new debt relief will be decided in the upcoming fall and will greatly depend on the stance and policies the Greek negotiators will adopt.
However generous the debt relief may be – we can forget about a haircut – it will not relieve Greece from the policies that sustain deficits and the re-inflation of the debt.
Under these circumstances, the upcoming double elections – local government and European – will determine a lot and more importantly, the debt negotiation climate.
With the public debt remaining excessively high, around 320 billion euros, Greece is at risk of being discredited once again, should the public finance control policies be subverted and the regained credibility is lost.
In other words, nobody can afford to underestimate the debt parameter. Anyone daring to do so, will have to face it…