by Nicos E. Devletoglou
Real Clear Markets
November 28, 2011
Europe and the international financial markets are two years deep into Greece's sovereign debt crisis. Yet critical questions not only stubbornly persist, but indeed transcend everything that has been said and done by European leaders. Late last month in Brussels those leaders presented their "grand rescue plan" for Greece. They continue to act as if just applying more and more of what they have been prescribing will alleviate the crisis. It will not. In fact, it will only make things worse. Why?
Today the EU, ECB and IMF - the so-called "troika" - require Greece to approve their new debt deal, which pushes private creditors to accept voluntarily a 50 percent loss on their Greek bonds in return for a fresh €180 billion bail-out package. This will be complemented with an injection of €106 billion in capitalization of weakened banks presumably coming from an emergency fund of the European Financial Stability Facility apparently due to expand to €1 trillion from €440 billion.
Indeed, the coalition government of Greek Prime Minister ad interim Lucas Papademos was installed on November 11 precisely to underpin that program by implementing even harsher austerity measures. In December the troika will disburse the still pending €8 billion tranche for Greece to meet current obligations and sanction another €70 billion pay-out in February.