When it comes to kicking the can down the road, European ministers have shown the world their expertise. Aligned with their ability to fudge issues, it gives markets and commentators plenty of material to write about.
This weeks further instalment of the Greek bailout is a case in point. After months of negotiation and discussion, including an open spat with the IMF, European institutions handed over several billion more Euros to Greece as part of their international bailout. IMF participation at this time was deferred.
Greece now has the liquidity to meet it’s immediate financial needs and will be kept off the front pages of the newspapers for the time being. Meanwhile, Greek people will be subjected to further austerity and recession.
Greek debt is supposed to be capped at 120% of GDP by 2020. Best guesstimates suggest this figure will be missed by a small margin. The figure is meant to be 110% by 2022. That suggests debt repayment at the rate of 5% per annum, an amazing achievement by any standards.
To help achieve these goals, interest rates paid by Greece have been cut to the bone. If market interest rates increase, it will have a knock on effect on Greece. A reduction in the amount owed by Greece has been factored in, without any details of how and when this might occur. So there will be future losses to be incurred by the lenders.
The plight of the Greek economy is subject to further downturns. Significant structural changes to the economy and state activity are needed, requiring strong political leadership. So far, these structural changes have not been addressed, and it would have been easier to implement them earlier, at a time when the Greek economy was stronger than it is now.
All in all, there is still widespread expectation of losses on Greek government borrowing. Much has been left undetermined. Yet Greece will slide out of the headlines for now. Plenty of potential uncertainty for trading the Euro and an expert lesson in kicking the can down the road.