Second bailout for Greece – Is this financial vandalism?

21st February 2012

Members of the European Union (EU) and International Monetary Fund (IMF) have agreed to stump up another €130 billion aimed at stabilising Greece's troubled economy, prevent contagion spreading to Ireland, Portugal and Spain, and keep the eurozone intact.

This is meant to allow Athens to avoid a disorderly default by meeting a €14.5 billion bond repayment due on 20 March. It also cuts the country's debt burden to 120.5% of GDP by 2020, compared to the current perilously high debt-to-GDP ratio of 160%.

But will it succeed?

This latest bailout is meant to reduce Greece's debts and improve its liquidity – but it by no means solves the ongoing eurozone crisis.

Shaun Richards, Mindful Money's economist blogger, concludes on his blog: "It would appear that there is to be no halt to the economic vandalism that is currently being inflicted on Greece. Another 3.3 billion Euros of public-spending cuts will be piled on an economy which is spiralling downwards in 2012. So we can expect more of the vicious circle of austerity leading to economic decline meaning more austerity is needed and repeat.

"It will not be too long before bailout number three is required and as the amounts spiral it is quite plain that not starting the process with a debt haircut was a fatal error in methodology."

Rmulberge1 comments: "I am simply amazed. I expected that the EZ ministers would grant the latest bailout funds but I would have thought that, given the time they have spent kicking the can around, that they might have come up with some plausible explanation as to how Greece is to get itself out from the awful situation it is in. Not a word – or not one that I can believe even half of. No prospect of growth, the threat of returning for more 'concessions', more ignominy heaped on the ordinary Greek people, who in all honesty cannot be held responsible for the mess their politicians have created.

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