One of the biggest stories in the eurozone today is Greece. Recently, a new government was elected that vowed to end many of the spending cuts the country has been facing. The only problem is that Greece is currently receiving financial assistance as the economy in the country doesn’t seem to be able to maintain itself as it is. In order to keep its promise to reduce spending cuts, the Greek government will need to be granted an extension on debts, but their requests to date have been declined.
A Bit About The New Greek Government
Led by Alexis Tsipras, the new Geek is thought by some experts to be a “coalition government of left and right, united only by their desire to defy the European financial establishment and shrug off the constraints of austerity.”
Once in office, the new government vowed to the people that “the end of humiliation has come”. They believe that the programs imposed on the country by creditors is unfair and belittles the Greek people. As a result, they have vowed to end these programs and replace them with policies designed to help the large percentage of Greek’s consumers who are living in poverty. As a result of this vow, the new government has been incredibly stiff with with regard to their willingness to adapt to demands made by creditors.
Now Greece And Creditors Are Negotiating Terms
While Greece has several lenders, the country’s largest lender by far is the powerhouse of the eurozone; Germany. With that said, one could imagine that when it comes to credit decisions, what Germany says goes. With that said, Greece and Germany (along with other creditors) are negotiating terms to keep the country funded.
The most recent move in this negotiation was a move by Greece to ask the eurozone for a 6 month extension on the loan program. However, it only took Germany a couple of hours to bat down that request. In response to the request for a six month extension, the Berlin Government stated that the request for a loan extension as well as an extension on negotiations was “no sustainable solution. Here’s what else Germany’s leaders had to say….
“In truth it goes in the direction of a bridge financing, without fulfilling the demands of the program. The letter does not meet the criteria agreed by the Eurogroup on Monday,”
Greece Needs To Come Up With A Real Plan
The bottom line here is that if Greece doesn’t do something soon, the country is going to run out of money. To date, they haven’t been able to come up with a sustainable plan to combat both poverty and overzealous government spending in the country. However, that all may change tomorrow as the eurozone finance ministers meet.
What Is Most Likely Going To Happen In Friday’s Meeting?
In my opinion, nothing! The new Greek government is proving to be incredibly stubborn. With that said, I’m not sure we’re going to see anything productive come out of tomorrow’s meeting. However, only time will tell! I’ll keep you posted.
What Do You Think?
Do you think the Greek government is right in the fight or do you think they should honor their obligations to the Eurozone. Let me know in the comments below.