Free Money (Well: Loans): Gifts for Greeks Bearing Too Much Debt
If you live in the US, you may have been a bit too preoccupied with your own national budget crisis to pay much attention to the current financial mess in (Southern) Europe, but just in case you’re interested: Last Thursday, the European leaders seem to have agreed on a solution that will save the Euro zone (for now).
The European debt crisis has been causing financial and political turmoil for a year and a half; in a nutshell, here’s what has happened.
In January of 2010, the Greek government informed the European Union (EU) of its plans to reduce its budget deficit from 12.7% to 3%, by saving more than 14 billion dollars. Since Greece is one of the countries using the common European currency, the EU decided to monitor the Greek plans closely, for they could well affect the strength of the Euro.
Four months later, the International Monetary Fund (IMF) and the other countries in the Euro zone provided Greece with an emergency loan of 110 billion Euros (about $150 billion), and Greece agreed to cutbacks of 30 billion Euros. In Athens, the Greek capital, three people were killed during riots against these plans.
Over the course of 2010, similar debt reduction plans were announced by Italy, Spain, Portugal, and Ireland.
In May 2010, the EU countries and the IMF had created a “temporary” emergency fund of 750 billion Euros to support the “weaker” countries in the Euro zone; in March of 2011, they decided to make this fund permanent.
In April of 2011, the Greek government announced additional debt reduction measures, including the sale of 50 billion Euros’ worth of state-held assets; however, there would be “no debt restructuring” –i.e., the country would not default on its debts.
While the Greeks appeared to be doing their best to resolve their issues, there was a majority in certain Northern European countries (including the Netherlands and Germany) that did not want their governments to provide the Greeks with any additional help.
(Interestingly, the debt crisis actually benefitted some of these people: because investors withdrew money from the Greek and Italian capital markets and reinvested it in government bonds issued by “safe” countries –notably: Germany, the Netherlands, and Sweden--, the inhabitants of those countries saw their mortgage rates drop by approximately 0.1 percent...)Continued on the next page