8 Jun 2015
EU officials wanting to make an example of Greece? – BBH
FXStreet (Barcelona) - With the unresolved Greek crisis keeping the market on edge, the Brown Brothers Harriman Team view that the European officials want to send a message that “there is no alternative to the diktat of austerity.”
Key Quotes
“The unresolved Greek crisis also keeps the market on edge. The official creditors made an offer to Greece, which was very much in line with the "pretend and extend" strategy. The Greek government summarily reject it. The Greek government gets little sympathy from the political elites and investor class. Nevertheless, its demand for debt relief is more realistic than pretending that its debt is sustainable. Even the IMF has called for debt relief though it wants to exclude itself from the process. It is willing to be more generous with EU money than with its own.”
“The Greek government has consistently maintained that it comes down to a political decision. It has been accused of trying to have an end run around the Eurogroup of finance minister. To the extent that the creditors finally offered its own proposal after Greece has submitted no less than three plans, it came about only with the intervention of officials at the highest level.”
“As European officials did in 2010-2011, they want to make an example of Greece. They want to send a message that there is no alternative to the diktat of austerity. But there is. It is called debt relief. This can take the orderly form of restructuring that EMU officials have permitted for private sector investors in Greece and Cyprus. It can take a less organized form of default. The more onerous the demand for austerity and refusal of the official creditors to devise a plan for debt restructuring, the more likely is a default. A default under current conditions would make the Argentinian crisis look like a tea party. Greece may very well have been dysfunctional before the crisis, but the cost to Europe of turning it into a failed state would be much higher than debt relief.”
Key Quotes
“The unresolved Greek crisis also keeps the market on edge. The official creditors made an offer to Greece, which was very much in line with the "pretend and extend" strategy. The Greek government summarily reject it. The Greek government gets little sympathy from the political elites and investor class. Nevertheless, its demand for debt relief is more realistic than pretending that its debt is sustainable. Even the IMF has called for debt relief though it wants to exclude itself from the process. It is willing to be more generous with EU money than with its own.”
“The Greek government has consistently maintained that it comes down to a political decision. It has been accused of trying to have an end run around the Eurogroup of finance minister. To the extent that the creditors finally offered its own proposal after Greece has submitted no less than three plans, it came about only with the intervention of officials at the highest level.”
“As European officials did in 2010-2011, they want to make an example of Greece. They want to send a message that there is no alternative to the diktat of austerity. But there is. It is called debt relief. This can take the orderly form of restructuring that EMU officials have permitted for private sector investors in Greece and Cyprus. It can take a less organized form of default. The more onerous the demand for austerity and refusal of the official creditors to devise a plan for debt restructuring, the more likely is a default. A default under current conditions would make the Argentinian crisis look like a tea party. Greece may very well have been dysfunctional before the crisis, but the cost to Europe of turning it into a failed state would be much higher than debt relief.”