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Greece Manages to Temporarily Stave off Bankruptcy

Nov. 27, 2012 9:54am
Greek Bankruptcy Averted ... for now

(Getty Images)

ATHENS, Greece (TheBlaze/AP) — Greece has avoided imminent bankruptcy after its international creditors finally agreed to give it more money, but the cash-strapped country’s economic distress is likely to drag on for years to come.

After three weeks of negotiations, Greece’s euro partners and the International Monetary Fund (IMF) agreed to release vital loan payments totaling some €44 billion ($57 billion) and introduce a series of measures designed to reduce the country’s massive debts to a more manageable level within a decade. These include reducing the interest rates Greece has to pay on the loans and a bond buyback program.

Greek Prime Minister Antonis Samaras hailed the agreement in Brussels early Tuesday as a victory that heralds “a new day for all Greeks,” but the reaction in the markets was a bit more cautious.

Greek Bankruptcy Averted ... for now

Antonis Samaras (Getty Images)

For three years, Greece has been struggling to convince markets as well as its creditors that it can get a grip on its public finances, which spiraled out of control. The country is predicted to enter its sixth year of recession and is weighed down by an unemployment rate of 25 percent.

The so-called troika of the European Central Bank, IMF and the European Commission has twice agreed to bail out Greece, pledging a total of €240 billion ($310 billion) in rescue loans — of which the country has received about €150 billion ($195 billion) so far. In return for its bailout loans, Greece has had to impose several rounds of austerity measures and submit its economy to scrutiny.

Without the bailout money, the country would be staring bankruptcy in the face together with a possible exit from the 17-country eurozone, with potentially chaotic repercussions for the world economy.

Greek Bankruptcy Averted ... for now

(Getty Images)

The meeting agreed to release €34.4 billion in loans to Greece in December, with the remainder issued in three installments in the first quarter of 2013. The money will be used to help recapitalize Greece’s struggling banking industry and pay back suppliers.

Greek Finance Minister Yannis Stournaras said the deal was “very important for it keeps Greece in the euro, offers it a significant opportunity to exit the vicious cycle of recession and over-indebtedness, and contributes to its debt reduction.”

But opposition leader Alexis Tsipras, whose Radical Left Coalition wants Greece to scrap its bailout commitments, accused the conservative-led governing coalition of failing to defend the country’s interests.

“The solution does not include a viable program for Greece, therefore it is no solution,” he said. “(It follows) successive failures of a program that has destroyed our society and meets none of the targets it sets.”

The meeting in Brussels was the third time in the last two weeks that finance ministers from the 17 European Union countries that use the euro had tried to hammer out a deal on the next installment of bailout money for struggling Greece.

Greek Bankruptcy Averted ... for now

International Monetary Fund Managing Director Christine Lagarde takes her seat during a briefing at the IMF headquarters April 19, 2012 in Washington, DC. The International Monetary Fund and World Bank are holding their 2012 spring meeting through April 21. (Photo by Alex Wong/Getty Images)

The main aim of the bailout program is to right Greece’s economy and get it to a point where it can independently raise money on the debt markets once the bailout loans start to run out at the end of 2014. It has been clear for months that the country is far from achieving that goal. Greece’s debt levels are expected to hit 190 percent of its annual economic output next year- some €346 billion.

Current forecasts have Greece’s debt level at 144 percent of its output by 2020. The IMF had originally said it would only agree to the bailout program if the country’s debt was at 120 percent by then. Tuesday’s meeting reached a compromise between the IMF and the euro ministers where Greece will now have to reach a 124 percent debt load by 2020 and below 110 percent by 2022. The difference between the current forecast and the new 2020 target would involve a cut in Greece’s debt load of some €40 billion.

The deal still requires the authorization of a number of Parliaments in Europe, including Germany’s, where patience with repeated Greek rescues has been running low.

Greek Bankruptcy Averted ... for now

A demonstrator holds a sign depicting German Chancellor Angela Merkel and three recent Greek prime ministers in Nazi uniforms during a protest against Merkel’s visit to Greece on October 9, 2012 in Athens, Greece. (Photo by Milos Bicanski/Getty Images)

However, Rainer Bruederle, the caucus leader of the Free Democrats, the junior coalition partner, said he expects broad approval this time on Thursday.

“Conditions have been put together which maintain a tough mechanism toward Greece, but still save us from a collapse of the Greek economy possibly having consequences that could pull down the whole of Europe,” he said.

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Comments (26)

  • dont_drive_slow_in_the_left_lane_obliviot
    Posted on November 28, 2012 at 12:18pm

    ah yes, Opa!

    Report this comment

    dont_drive_slow_in_the_left_lane_obliviot  
  • MelodyM
    Posted on November 28, 2012 at 5:23am

    Let me actually agree with chips1, even though I have never though I could say something like this. You know I feel really sorry for people who chose to stay in Greece for whatever reason. I can hardly imagine myself living in a country that has news like this one. Looks like there is no happy future for Greece. I can also agree with those who say that the US is quite the next country to experience the same situation: economical and financial. Time will show was right.
    Melany from online http://paydayloansat.com/installment-loans-for-bad-credit/ company

    Report this comment

    MelodyM  
  • crypticguise
    Posted on November 27, 2012 at 4:50pm

    Idiots!

    Report this comment

    crypticguise  
  • RayOne
    Posted on November 27, 2012 at 12:25pm

    The Party in Charlotte worked, the DNC was the winner, it is their turn to show the plan to avoid the Fiscal Cliff.
    The White House has a plan, it is time to bring it out of the Oval Office and Air Force One.
    Senator McCain making promises is way he lost 4 years ago. And the GOP Senators are feeling the heat of a constituency abandoned.
    The President should reveal his plan, pretend it’s Dancing With the Stars.

    Report this comment

    RayOne  
  • huey6367
    Posted on November 27, 2012 at 11:49am

    Greece will you just pull the band aid off in one quick motion. you are extending the pain to yourself and the world and you know the inevitable conclusion – you are going bankrupt. Hell, you are bankrupt. Quit playing around.

    Report this comment

    huey6367  
  • JeffMT
    Posted on November 27, 2012 at 11:35am

    No, Greece did not stave off bankruptcy. They are bankrupt and they have been for years.

    Europe is bankrupt. The USA is bankrupt. California and Illinois are bankrupt. Etc. etc. etc.

    This whole thing is nothing more than one giant shell game financed by keyboard-created ‘money’.

    How can this end well? How?

    Report this comment

    JeffMT  
  • Brucifer
    Posted on November 27, 2012 at 11:22am

    It is a fiscal cliff for me and many other Americans.
    Here’s why……By federal law, the Emergency Unemployment Compensation 2008 (EUC08) program is ending on December 29, 2012. This includes EUC08 Tier 1, Tier 2, Tier 3, and Tier 4 benefits. The last date to establish an EUC08 claim or have a tier added is the week beginning December 23, 2012. No EUC08 benefits can be paid out for any weeks ending after December 29, 2012, even if there is a balance on the EUC08 claim.

    How many MILLIONS of Americans on in Tier 1, 2 or 3? Too damned many, and I am one of them.
    That means, in the 1st week of 2013, one Hell of a lot of people will stop getting an income while they are still ACTIVELY looking for work, as I have been since February, 2012??

    Does this look like a Fiscal slope now?

    Report this comment

    Brucifer  
    • fukjihad
      Posted on November 27, 2012 at 3:13pm

      and your benefits should be ending, most anyone can go get a job at mcdonalds and earn as much as unemployment benefits but most people would rather not.

      Report this comment

      fukjihad  
  • countryfirst
    Posted on November 27, 2012 at 11:08am

    It will never happen here, we have a lord and savior BHO

    Report this comment

    countryfirst  
  • Proud Stray Dog
    Posted on November 27, 2012 at 10:28am

    Here’s an idea: Why don’t we rename Greece “Green Energy” and it would still be the same. One giant black hole sucking billions down and getting nothing in return. Or here’s a better one….Socialism run amok. Eventually, the house of cards will fall, and then they will know true pain and suffering.

    I’ve been down that road, lost everything, and built myself back up(read The Book of Job sometime). It’s not a road for the faint-hearted or slackers. Did I beg Uncle Sam for a handout? Hell no. I pulled myself up by the bootstraps and overcame. I I also learned what’s important in life, and it’s not material possessions. In my humble opinion, BRING THE PAIN!!!!

    Report this comment

    Proud Stray Dog  
  • BlackCrow
    Posted on November 27, 2012 at 10:27am

    The longer you put it off the worse its going to be when it happens.

    Report this comment

    BlackCrow  
  • Snowleopard {gallery of cat folks}
    Posted on November 27, 2012 at 10:20am

    One more short delay until the growing tide of the inevitable slams home with greater force.

    Report this comment

    Snowleopard {gallery of cat folks}  
  • Knightofhopex
    Posted on November 27, 2012 at 10:12am

    Yeah, I don’t call selling your children into slavery and your assets to China “staving off bankruptcy”. If anything, the socialist left is trying to white wash this situation by coming in after the fact and sticking a flag in Greece’s corpse to say ” Look, we fixed it! ” …BS. You idiots screw everything up. Learn history, socialist morons.

    Report this comment

    Knightofhopex  
  • RayOne
    Posted on November 27, 2012 at 10:09am

    The WH should keep an eye on this Greece development.
    It is his ‘Sound Of Freedom’.

    Report this comment

    RayOne  
  • doomytram
    Posted on November 27, 2012 at 10:09am

    Greece is like a beautiful, less crime ridden, and more solvent Chicago, Illinois. Rahm is a toid and a miniature Napoleon, and oh to only have Greece’s money problems. Chicago is bottomless pit of non edumacation.

    Report this comment

    doomytram  
  • DZ-015
    Posted on November 27, 2012 at 10:06am

    And just who is going to bail US out?

    Report this comment

    DZ-015  
  • chips1
    Posted on November 27, 2012 at 10:04am

    Putting out good news like this means only one thing. It’ worse than we thought. Time to protect yourself is getting short.

    Report this comment

    chips1  
  • Proverbs17-12NLT
    Posted on November 27, 2012 at 10:03am

    Temporarily, it’s coming.

    Report this comment

    Proverbs17-12NLT  

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