As I noted recently, the spectre of default still stalks Greece, despite the recent votes by that country’s Parliament to accept yet more austerity. But there was also the potential for a default to knock on across not only the Eurozone, but also the UK and USA, and so discipline was paramount in any effort to restructure and reschedule debt, specifically that held by privately owned banks.
And now, almost immediately after the latest vote on accepting yet more spending cuts and sell-offs, has come the news that German banks have agreed to roll over some three billion Euro worth of loans. This is a necessary first step: there are another seven billions worth of private sector loans to Greece made by German creditors.
Along with the news from Germany have come actions by French banks to roll over half of their maturing Greek debt. Further action by creditors in the UK and USA will inevitably follow. So the “orderly restructuring” I described previously is now beginning. There will no doubt some who complain that this should be called out as default, typical among them MEP and occasional Tory Dan, Dan the Oratory Man.
So what will encourage what the BBC’s Chris Morris calls “the balance between enforcing austerity and encouraging growth”? Given that many in Greece are already suffering financially, there is little room for manoeuvre, except of course for creditors to take a haircut. As I previously warned, some creditors will have to accept that they are not going to get 100 cents on the Euro.
This realisation, and that the Greek problem will be there not just for months but for years ahead, is dawning across the north Atlantic too. And after Greece, although the effects may potentially be less severe, will come Ireland and Portugal. Thus far, EU Governments and institutions have kept that all-important discipline: this is something to consider next time the screaming headlines predict disaster.
But whether or not that “orderly restructuring” is successful, there is an elephant in the room which some observers are most reluctant to discuss, and that is the role of the recent financial crisis, the lack of market regulation, and the spread of new devices for, basically, satisfying the need for greed.It will do little good blaming that on the Greeks: any attempt to shout “look over there” should not deflect regulators from facing down the tendency to casino development. Because if that tendency is not faced down, there will be yet more crises further down the road.