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Germany Asks for Third Bailout and More Debt Haircuts

europe-greeceThe new German proposal addresses the financial crisis that is plaguing Greece with a new bailout loan, more debt haircuts and a more responsible attitude on Greece’s part.
This was stated by the GermaInstitute for Economic Research president, Marcel Fratzscher who added that in order to effectively deal with the European economic crisis we need a “European investment agenda” that will amount to at least 160 billion euros annually.
Fratzscher stressed that in the last 60 years, no other country has received such financial assistance from international organizations and institutions as has Greece in order to address its economic problems. He concludes, “the issue is not that they are not given enough money, but that the fact that the money they receive has not been properly used by the government.”
“A more serious problem for Greece is that its institution does not work properly” underlined Fratzscher who also noted that this situation creates hesitation among foreign investors.
If the situation of the public administration and tax authorities’ efficiency does not improve, the aid packages will not produce positive results.
Furthermore, Fratzscher also stressed that a third aid package which Greece is in need of, will be negotiated during the summer, but it will not be enough to tackle the country’s debt. The Greek debt which amounts to almost 180% of the country’s GDP, is not sustainable.
A haircut of this size would mean that German taxpayers would be even more burdened to raise 30 to 40 billion euros. This amount, according to the German economist, is not negligible, even for Germans. It is basically half the amount that Germany is currently offering as collateral for Greek loans and which will most likely not be repaid.

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