Germany appears ready to aid in a Greek bailout without stringent conditions on the control of the southern European nation’s budget. The ECB and private investors appear closer to exchanging their debt for less valuable paper, although the ECB may hold out for bonds which are senior to those to help by private investors.
Signals from other countries are now that new cuts in the Greek budget are enough for them to act on a new 130 billion euro rescue.
Reuters reports that
Euro zone finance ministers look set to approve a bailout package for Greece on Monday although final details are still being worked out, Austrian Finance Minister Maria Fekter said on Sunday.
There are several issues the settlement will not take off the table. Greece’s debt to GDP is 120% and many economists say that as its GDP drops at a 5% rate or faster that no realistic amount of austerity can offset that. As a matter of fact, the lack of stimulus to the Greek economy, which must now wrestle with an unemployment rate of over 20% and pension holders who will receive smaller payments, may be insurmountable. Those things are factors which may cause GDP contraction to accelerate.
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