No quick cure for Greek balance sheets
Emergency crews had to be summoned on Tuesday to clean up the 17 days’ worth of garbage strewn in the streets of Athens. Civil mobilization orders were issued by Greek PM George Papandreou, but the piles of rotting garbage showed just how desperate the situation has become in the country.
As Greek trade unions plan to disrupt the parliamentary vote on austerity measures, a national strike is expected to ground all flights and halt most public services in the country on Wednesday and Thursday, reports the Associated Press.
The vote on the severest austerity measures Greece has seen since the beginning of its financial crisis will include more tax hikes, further pension and salary reductions and the suspension of collective labor contracts. The MPs will also consider putting some 30,000 civil posts on reduced pay with a view to their total decommissioning.
Athens is eyeing a second rescue bailout package worth €109 billion, which was initially agreed with the EU, IMF and ECB in July, but crucial details remain to be worked out. The issue might be settled during an EU summit this weekend.
The Greek government fears running out of money by mid-November, but nothing it has done seems to have brought the desired cure for the economy, says financial analyst Patrick Young.
“This is simply impossible,” he says. “The Greek economy is such a mess there is nothing that can be done.”
Young cites the Greek railways as an example. The total salary builds up to a hundred million euros, while in total the railway costs about 700 million euros per year. “You cannot possibly change these numbers in such a short period of time,” he remarks.
“Now we are going to have what in banking terms is called a haircut on the debt. And ultimately, a lot of people are going to be left somewhat bald,” said Young.
European banks will be the first to suffer if Greece defaults half its current debt. In the best-case scenario, banks will have less money to credit the region, while in the worst case, several banks will have to go out of business, says Young.
Athens’ partial default is imminent, believes the analyst. But even the remaining amount of debt would be equal to the debt of the UK or Germany.