The markets are cheering the news that a new Greek bailout package is taking form. But it’s nothing new really. It’s more loans now in exchange for more austerity. Somehow, this is supposed to rectify the Greek budget issues even though the austerity is directly contributing to the lower growth and collapse in tax revenues. The NYT reports:
“LONDON — A new rescue package for Greece is taking shape, one that would offer billions of euros in fresh loans in return for accelerated privatization and tougher tax collection measures on the part of the beleaguered Greek government.
While the agreement for as much as €60 billion, or $86 billion, would, in theory address Greece’s need for cash this year and next, it puts off for the time being a restructuring, hard or soft, of Greece’s mammoth debt burden.
Later in June, the E.U. first and then the I.M.F. would approve the additional financing, thus clearing the way for €12.5 billion to be disbursed to Athens at the end of the month.
The new loans, however, will only be forthcoming if more austerity measures are introduced.
Along with faster progress on privatization, Europe and the fund have been demanding that Greece finally begin cutting public sector jobs and closing down unprofitable entities.
They also have been pushing Greek politicians to unite behind the new austerity package to help ensure it sticks, and are discussing a decrease in the value-added tax as a concession to win support from the right-of-center opposition, which wants more tax relief to help the moribund economy.”
Basically, this is more can kicking. The markets are breathing a huge sigh of relief because the insolvency discussion is off the table. For now. But we’ll likely revisit it down the road when we again recognize that austerity still isn’t working. And that’s assuming the citizens of Greece don’t wake up before then….