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The hurdles facing Greece

21 February 2012

7:00 PM

21 February 2012

7:00 PM

Greece’s problems are far from over. As Pete said this morning, the €130 billion bailout hardly means the country is out of the woods, or that it
won’t still be ejected from the eurozone. Standard Chartered have released a handy guide to the many obstacles Greece faces. Here are some highlights:

1. The first hurdle is the private-sector debt swap due to take place March 8-11. This is when private creditors are supposed to swoop in and save the day. But, to be enticed to do
so, Greek bonds will likely have to come with collective action clauses (CACs). Here’s where it gets technical — if these CACs are invoked, payouts on credit default swaps will be
triggered and the impact on financial markets is highly uncertain. It’s an issue that the EU and the ECB — indeed, many global financial authorities — have been twitchy about for
some time.


2. Other euro nations need to approve the so-called sweetheart deal. The Bundestag is expected to support Greece’s rescue package and its own contribution to the venture, but
other parliaments — that of the Netherlands, in particular – are less gung-ho. Standard Chartered points out that the Dutch pro-European labour party, on which the government relies to
pass such bailout agreements, has seen its leader quit due to the party’s growing unpopularity.

3. Then there’s the ‘ring-fencing’ part of the agreement put in to assure other euro-area members, which forces Greece to prioritise debt servicing over its other
spending obligations. Athens itself needs to approve this measure, and this is not a sure-fire thing, especially as the Greek parliamentary vote on this issue takes place just before elections
(pencilled in for April). The mainstream PASOK and New Democracy parties are losing support, while extremist left-wing parties are gaining, notes Standard Chartered — this could throw a
spanner in the works of the austerity programme.

4. And, crucially, the Greek economy remains very weak. It’s still in deep recession, and is showing little sign of recovery yet, as Standard Chartered’s graph shows:


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