Greece and The Greek Debt Crisis

10 Feb

I am a fee charging financial adviser (but the commission option is available) at Jewell & Petersen Ltd based in Cardiff, South Glamorgan. Follow me on Twitter and LinkedIn.

Greece’s deadline of Monday 6th February 11am came and went, the requirement  was to have sorted out its agreement with private bondholders. In the agreement had to be a new set of austerity measures in order to trigger the release of the next phase of bailout funds. Given the progress of EU politics, this ‘deadline’ passed by and Greece hasn’t defaulted  as yet, markets haven’t collapsed and world events continue.

Monday’s deadline’ passed with the usual posturing by leaders from Germany and France. The gist from both were broadly the same as spoken last time. The negotiators from the Greek government and its creditors  let a deadline pass.

There is, however, a real deadline looming. On 20th March 2012, Greece has to repay a large chunk of debt to those holders of its sovereign debt. It cannot pay this debt off without the next tranche of bailout money from the European Union and IMF.

The European Union is looking for Greece to enact several severe budgetary cuts. This is to show it’s intent about getting the framework, structure and plan for its finance in place to achive a resolution to its debt crisis. Greek politicians are nervous about agreeing to policies that they fear won’t work and could ignite social tensions. Some of these tensions have overflowed in recent days.

European Union leaders are becoming more impatient with Greece. Although, it’s not a one-sided debate where Germany and France can pressurise Greece into action. Consider this statement made by the leader of the Eurogroup leader and Luxembourg Prime Minister Jean-Claude Juncker:

“If we force them out or push them so much that they resign, we would still be forced to support Greece and would today have to invest unimaginable sums. That would be at least as expensive as the now virtual costs of the aid credits up to now.”

The Greek government knows that the European Union would have no choice but to pay for a huge bill if it forces Greece out of the Euro. This situation is expected to continue until both sides are satisfied.

“Time is running out,” says Chancellor Merkel. This may be true but the real deadline that matters to investors is 20th March, where despite all posturing debt will have to be repaid and the money must be available to meet that payment.

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