I mentioned this briefly yesterday, but the Greek bailout is truly in trouble, and it’s unclear whether the problem lies with Greece or the bondholders. Either way, it’s not as if anyone will suffer other than the Greek people.
Germany and France warned Greece on Monday it will get no more bailout funds until it agrees with creditor banks on a bond swap and pressed for an early deal to avert a potential default in the euro zone’s most debt-stricken nation.
They rejected both a call by a European Central Bank policymaker to abandon plans to make private investors take losses, and a leaked International Monetary Fund memo that cast doubt on Athens’ ability to reform its public finances.
“We must see progress on the voluntary restructuring of Greek debt,” Merkel told a joint news conference. “From our point of view, the second Greek aid package including this restructuring must be in place quickly. Otherwise it won’t be possible to pay out the next tranche for Greece.”
Gotta love that, the ECB wants to protect debt holders entirely. This tells you that, in the event of a default, the ECB will come rushing to the rescue of the debt holders, mostly banks, and the Greek people will have nobody to turn to. So when Merkozy put pressure and threaten the next tranche of bailout funds, it inevitably helps the debt holders get a better deal. Because Greece is the only entity truly threatened by a default.
Remember that Germany helped negotiate the deal with Greek debt holders to take a 50% haircut. Now they’ve become completely hands-off on the deal, leaving a weak Greek government with no leverage to negotiate. Predictably, the creditors are bailing on the agreement, and nobody knows yet whether this “voluntary” haircut will trigger credit default swaps.
Meanwhile, to what are Greeks turning in this crisis? Subsistence farming.
Nikos Gavalas and Alexandra Tricha, both 31 and trained as agriculturalists, were frustrated working on poorly paying, short-term contracts in Athens, where jobs are scarce and the cost of living is high. So last year, they decided to start a new project: growing edible snails for export.
As Greece’s blighted economy plunges further into the abyss, the couple are joining with an exodus of Greeks who are fleeing to the countryside and looking to the nation’s rich rural past as a guide to the future. They acknowledge that it is a peculiar undertaking, with more manual labor than they, as college graduates, ever imagined doing. But in a country starved by austerity even as it teeters on the brink of default, it seemed as good a gamble as any.
See, there’s always hope for people, they can put their college degrees to work and live off the land! So what is everyone worried about?
Photo: Jo Chambers/shutterstock.com