In his interview for the German newspaper «Sueddeutsche Zeitung» the American economist warns against the austerity policy implemented in many European countries:
"Democracies can withstand cuts without seeing light at the end of the tunnel, but there is always a red line... nowhere in the world can we find an example where salary, pension and social expenditure cuts resulted in the growth of a weak country!"
In addition the second support package of 130€ billions was also approved by the Euro-group.
It should be noted that the "haircut" was much lower than the 70% that initially discussed and the exchange of the bonds will start in the next few days.
With the new support package of 130€ billions, the Greek debt will be formed in 2020 to 120.5% of GDP, slightly above the 120% which countries such as Germany, the Netherlands and the IMF wanted.
Almost 60% of Greeks have replied negatively regarding the EU decision that reduced the Greek debt. The majority of Greek people believe that it causes harm to the society, based on a poll on Saturday.
The study was conducted just after Thursday's summit arrangement for the 130 billion euro bailout package.
Difficult times for the Insurance bureaus in Greece due to the fact that haircut will seriously influence their funds.The Ministry of Employment and the heads of the Bureaus are claiming this is caused due to the financial crisis and non payments of insurance taxes.
European bankers were persuaded to adopt 50 % losses on Greek financial debt. In addition, EU raised the size of the rescue fund to one trillion euros, giving answers to the worldwide demand to intensify the battle against the economic crisis.
The agreement was achieved after many hours of tough negotiations involving bankers, EU leaders, central bankers and also the International Monetary Fund and aims to protect the European Union from the issues caused by the crisis of dept. Angela Merkel stated from Brussels that “The world’s attention was on these talks” and that “We Europeans showed tonight that we reached the right conclusions.”
Negotiations on the level of the Greek dept "haircut" are continued. It is quite possible, that French president Nicolas Sarkozy and German Chancellor Angela Merkel will negotiate, during the night,directly with the banks in order to convince them to accept a loss of around 50%.
The aim, as Angela Merkel stated, is to reduce the fiscal deficit of Greece from 160% of GDP to 120% in 2020.
Moreover, according to this scenario, private banks will renew the 110 billion euros in Greek bonds the hold with terms more favorable to Greece. This action will allow a "haircut" around 50%.
Eurogroup head Jean-Claude Juncker revealed today that there are talks a haircut of the Greek debt greater than 50 %. Moreover, French newspapera claimed there's also an agreement with banking institutions for a cut between 50 and 55 %.
Heading to the Ecofin meeting of EU economy and finance ministers in Brussels, the Luxembourg Prime Minister mentioned that there have been negotiations about the value reduction of Greek state bonds over 50%, however avoided giving a exact reference to the exact haircut rate which is discussed.