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Greece Debt Talks – From Danger to Safety – How did we get here?
With Monday morning comes more news about Greece. This time it isn’t news of an ever-impending grexit but actually that “There will not be a ‘Grexit'” (European Commission head Jean-Claude Juncker). It appears this weekend that other than the intrigue of Roger Federer versus Novak Djokovic, the Eurozone leaders reached an agreement in their summit. This weekend after multiple weeks of uncertainty and bad press, it would appear that we may finally be heading towards a modicum of stability, let alone sanity.
This weekend, the Eurozone finally agreed a third bailout package for Greece worth over €80bn. The first instalment of money will be €10bn to recapitalise the saturated Greek banks. The only caveat applicable to this new round of bailout (other than interest rates), is that the Greek parliament will have to pass the proposed reforms by the 15th July – this Wednesday. The reforms will affect VAT, pensions and the establishment of an independent office of statistics. If the Greeks comply with the reforms, they will also benefit from debt restructuring, allowing them to renegotiate its delinquent debts, making repayment easier.
The long term outcome from this batch of Greece Debt Talks is yet to be seen, especially as the Greek people were already against austerity and these reforms are yet more of the same. In the short term, it finally displays a willingness of the new Greek Finance Minister to work with the Eurozone and flesh out a reasonable outcome to the never-ending Greek tragedy. It also shows how key players, such as Juncker (European Commission President), Merkel and Hollande are, behind the not-very-subtle game of smoke mirrors, very much dependent on Greece staying in the Euro and keeping the Eurozone going. No doubt the current outcome from the Greece Debt Talks will be received with much relief. The markets so far today have all reacted positively.
Verdict:- Greece Debt Talks seem to have put an end to the calls for ‘Grexit’. If one thing has been learned, you cannot dampen domestic politics – if the Greek people rear their heads, the debt talks will count for nothing. Wait and See.
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Article by Michael Cooper