Friday, October 28, 2011

CrossTalk: Euro Haircut

3 weeks ago a date was set by French Prime Minister Nicolas Sarkozy to sort out Greek debt resolutions. After 3days of marathon talks Greek debt was slashed by 50% (equivalent of €100 billion) and debt-to-gdp is to be reduced to 120% by 2020. A debt-to-gdp ratio over 100% is a clear sign a country's economy is not working so a reduction to 120% is not exactly a goal for a stable nation that has an upper hand on the situation. Current Greek debt-to-gdp is ruffly 160%. Greece has also adopted a number of austerity packages since 2010 which have resulted in protest including physical clashes.

"when is a deal really a deal?"
"who's going to pay for the bailout: "
"It's about as voluntary as sticking a gun to someone's head and making them agree to it"
"it is a terrible program"
"this is like an Irish marriage where the preist tells the couple to stick it out no matter how bad it gets"
"wouldn't it be better to just have Greece leave the Eurozone"
"as for Greece or any other country leaving the Euro - I don't think this would be a good idea... for a simple reason none of the long term benefits for being in the Euro are null and void"
"It's as though we have a case of gangrene in the head of a patient and the cure is to decapitate him"
"we have a system where growth has been halted - how are we going to make these gdp target projections"
"where is the growth to pay for these future debts!"
"proponents of austerity say you can not spend your way our of a debt crisis... well one thing is you can't cut your way out of a debt crisis. You have to generate growth and growth requires investment."

"we need real banking reform"
"the moral hazard argument is obviously there - if they're wrong the tax payer has to pick up the bill"
"if your being honest not much has been reformed in the past 3 yrs"
"The fear is if Germany is going to become the United States of Europe"
"frankly I don't think the American model is the right one"

Henning Meyer
Jeffery Sommers
Marshall Auerback

Will Greek Haircut (50% debt reduction) be enough to save Greece from a future default on debt?


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