rethink plans is imperative to make them effective, flexible and fast in execution
The design and management failures have hampered rescue a quick exit to the Greek crisis
Javier Ayuso / COUNTRY
was right José Carlos Diez, a regular contributor this blog, when he said in the debate this week that "Angela Merkel and his government should be quiet for six months to stabilize European markets." Is not sufficient, but necessary, essential, I would say, to advance the rescue of the three countries that have had to host the European rescue plan and whose future is again in question following statements these days, rumors news and raised in Germany.
16 and May 17 (Monday and Tuesday this week), the Eurogroup finance ministers have to decide whether to approve the rescue plan Portugal (78,000 million euros), in addition to assessing the progress of the rescue of Greece (110.000) and study the possibility of lowering interest rates on loans to Ireland (85,000). The Phantom of the Greek debt restructuring will be present in meetings in which, although not recognized yet, the ministers know that the rescue model is treading water and you have to change it.
Last Sunday, Guillermo de la Dehesa explained in these pages the "design flaws and management of the euro area." CEPR President enunciated three design flaws and six of management. And among the latter claimed, inter alia, that the delay of over six months (from October 2009 to May 2010) in the rescue of Greece, the initial negative EFSF to buy the debt of countries with credit problems, high interest rates on loans (5.8%) and refusal to create a Eurobond market like the U.S. exacerbated the spread to other countries and hindered a rapid exit from the crisis in Greece.
The fact is that, provided there is exactly one year of the first rescue, responsible for financing the European Union are facing difficult decisions also require unanimity in a time when every European country is emerging from a crisis very different pace and with different priorities.
The good news is that Finland has announced it will support, albeit with conditions, the rescue of Portugal, which had initially rejected fueled by the rise of the far right in this country. Essentially, what you ask is that Portugal Finland ensure repayment of loans (to 78,000 million) by selling public property and to include the participation of private investors in the bailout program.
The first request makes sense and is even appropriate, given that, last Thursday, the International Monetary Fund (IMF) encouraged Greece to accelerate its privatization plan, amounting to 50,000 million by 2015. And the second is already covered by the European Stability Mechanism (ESM), which takes effect in 2013, but not in force rescue fund (EFSF). Although I imagine that will be viewed favorably by Germany and France, considering that their banks are leading in bank exposure in Greece (59 400 million, the French banks, and 40,300 Germans).
regard to the rescue of Ireland, the debate will arise depending on interest rates. The loans granted by the EU and the IMF (85,000 million) in November was set at a rate of 5.8%, exceeding initial Greece, established in May 2010 (5.2%), which also was lowered in March last 4.5% with longer repayment terms. It seems clear that excessive ransom hinders the recovery of the creditworthiness of countries in distress. Although the EU will take the time to ask for tax concessions to Ireland in exchange for lower interest rate loans.
Finally, the Eurogroup will have to analyze the progress of the rescue plan in Greece. After several days of mixed messages between Germany and Greece, which rekindled the European markets, EU officials said Tuesday that first of all there is to know the report is conducting the mission of experts from the EC, the ECB and IMF on the implementation of the adjustment plan undertaken by the government of George Papandreou.
absence of these findings, it is already known is that Greece has so far received 53,000 of the 110,000 million committed by the EU and the IMF and which is due to receive another 12,000 million shortly. In exchange, has committed to further fiscal adjustment plan of 23,000 million euros and a privatization plan for 50,000 million. Greek debt in December 2010 stood at 328,000 million euros, representing more than 140% of GDP (170,000 million). For its part, the Hellenic Government has reduced the deficit to 10.5% of GDP, although their economic growth in the red until 2012 and unemployment exceeded 14% of the workforce.
Against this background, the markets began to speculate on the possible relaxation of reorganization measures or any additional aid, and there was talk in the flurry of exchanges, out of Greece's euro, and even of default. Once calm the storm, which seems to arise in the coming weeks include additional loans worth between 30,000 and 60,000 million, according to different sources.
Whatever happens, it requires a rethinking of the rescue plans of the EU to make them more effective, flexible and fast in execution, to allow the purchase of bonds in the primary and secondary markets, to develop a market for Eurobonds large and liquid, you hear the private sector in designing plans and, of course, to revise the price and credit terms.
The design and management failures have hampered rescue a quick exit to the Greek crisis
Javier Ayuso / COUNTRY
was right José Carlos Diez, a regular contributor this blog, when he said in the debate this week that "Angela Merkel and his government should be quiet for six months to stabilize European markets." Is not sufficient, but necessary, essential, I would say, to advance the rescue of the three countries that have had to host the European rescue plan and whose future is again in question following statements these days, rumors news and raised in Germany.
16 and May 17 (Monday and Tuesday this week), the Eurogroup finance ministers have to decide whether to approve the rescue plan Portugal (78,000 million euros), in addition to assessing the progress of the rescue of Greece (110.000) and study the possibility of lowering interest rates on loans to Ireland (85,000). The Phantom of the Greek debt restructuring will be present in meetings in which, although not recognized yet, the ministers know that the rescue model is treading water and you have to change it.
Last Sunday, Guillermo de la Dehesa explained in these pages the "design flaws and management of the euro area." CEPR President enunciated three design flaws and six of management. And among the latter claimed, inter alia, that the delay of over six months (from October 2009 to May 2010) in the rescue of Greece, the initial negative EFSF to buy the debt of countries with credit problems, high interest rates on loans (5.8%) and refusal to create a Eurobond market like the U.S. exacerbated the spread to other countries and hindered a rapid exit from the crisis in Greece.
The fact is that, provided there is exactly one year of the first rescue, responsible for financing the European Union are facing difficult decisions also require unanimity in a time when every European country is emerging from a crisis very different pace and with different priorities.
The good news is that Finland has announced it will support, albeit with conditions, the rescue of Portugal, which had initially rejected fueled by the rise of the far right in this country. Essentially, what you ask is that Portugal Finland ensure repayment of loans (to 78,000 million) by selling public property and to include the participation of private investors in the bailout program.
The first request makes sense and is even appropriate, given that, last Thursday, the International Monetary Fund (IMF) encouraged Greece to accelerate its privatization plan, amounting to 50,000 million by 2015. And the second is already covered by the European Stability Mechanism (ESM), which takes effect in 2013, but not in force rescue fund (EFSF). Although I imagine that will be viewed favorably by Germany and France, considering that their banks are leading in bank exposure in Greece (59 400 million, the French banks, and 40,300 Germans).
regard to the rescue of Ireland, the debate will arise depending on interest rates. The loans granted by the EU and the IMF (85,000 million) in November was set at a rate of 5.8%, exceeding initial Greece, established in May 2010 (5.2%), which also was lowered in March last 4.5% with longer repayment terms. It seems clear that excessive ransom hinders the recovery of the creditworthiness of countries in distress. Although the EU will take the time to ask for tax concessions to Ireland in exchange for lower interest rate loans.
Finally, the Eurogroup will have to analyze the progress of the rescue plan in Greece. After several days of mixed messages between Germany and Greece, which rekindled the European markets, EU officials said Tuesday that first of all there is to know the report is conducting the mission of experts from the EC, the ECB and IMF on the implementation of the adjustment plan undertaken by the government of George Papandreou.
absence of these findings, it is already known is that Greece has so far received 53,000 of the 110,000 million committed by the EU and the IMF and which is due to receive another 12,000 million shortly. In exchange, has committed to further fiscal adjustment plan of 23,000 million euros and a privatization plan for 50,000 million. Greek debt in December 2010 stood at 328,000 million euros, representing more than 140% of GDP (170,000 million). For its part, the Hellenic Government has reduced the deficit to 10.5% of GDP, although their economic growth in the red until 2012 and unemployment exceeded 14% of the workforce.
Against this background, the markets began to speculate on the possible relaxation of reorganization measures or any additional aid, and there was talk in the flurry of exchanges, out of Greece's euro, and even of default. Once calm the storm, which seems to arise in the coming weeks include additional loans worth between 30,000 and 60,000 million, according to different sources.
Whatever happens, it requires a rethinking of the rescue plans of the EU to make them more effective, flexible and fast in execution, to allow the purchase of bonds in the primary and secondary markets, to develop a market for Eurobonds large and liquid, you hear the private sector in designing plans and, of course, to revise the price and credit terms.
0 comments:
Post a Comment