I do not know about you but I was under the impression that when the news was talking about a 50% haircut on Greek bonds that meant the debt of Greece would be reduced by 50%.
I was completely wrong.
What make me look at it again was a headline in Athens News today.
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The first thing that struck me was the “70%” headline. I thought to myself “now we are talking about something more realistic”. But then I saw the figures, 70% equals 100 billion Euro.
Greek government debt is over 340 billion Euro so the headline should read something like “30% haircut”.
But of course it is all complete and utter nonsense.
The Greek government has taken a bailout deal worth 110 billion Euro, so this haircut makes no difference at all. Greece is in a worse position that it was at the start of the crisis because it’s GDP has shrunk by 20% and the debt load is the same.
The entire media is misleading the public on 2 counts.
1. Stating a 70% haircut is a 70% reduction in government debt when it is in real terms a 30% haircut.
2. Stating that the haircut improves Greece’s financial position when it fact it simply takes the country to its 2008 crisis debt levels.
The most disappointing and frustrating thing that apparently no news outlet is highlighting the fact that the Greek austerity measures have made Greece even less able to service its debt.
And that the austerity measures and bailouts have made absolutely no difference to the Greek debt or government deficit.
Realistically, the Greek government’s total debt needs to be reduced by 80% at a minimum for the Greek government to stand any chance of being able to service the debt. Until the politicians and media start talking in these terms they should not be taken seriously.
Please correct me if I am wrong.
Greek “austerity measures” are not a policy just a reality. Greek politions may be presenting a reality but that is not a new thing. You had it right with your post about trade deficits.
typo – “a reality as a policy”