cornerstone of Greeces so called medium term fiscal strategy MTFS is a

Cornerstone of greeces so called medium term fiscal

This preview shows page 12 - 14 out of 26 pages.

cornerstone of Greece’s so-called medium-term fiscal strategy (MTFS) is a consolidation program through 2015 worth €28 billion (about $40 billion, 12% of GDP), including €6.5 billion (about $9 billion, 2.9% of GDP) of additional spending cuts and revenue measures to be implemented in 2011. The newly proposed consolidation measures aim primarily to reduce over-staffing in the public sector, improve the financial performance of state-owned enterprises, and streamline social transfers. The other major component of the new fiscal strategy—and its most contentious—is an ambitious privatization and public real estate development program designed to raise €50 billion (about $72 billion) by 2015, including €15 billion (about $22 billion) by 2013. Concerns about the Greek government’s administrative capacity have led to discussions that the sale of public assets will be, quite unusually, overseen by an independent privatization authority, which included EU and IMF representatives. Losses on Greek Bonds In July 2011, European leaders and the Institute for International Finance (IIF), an association of private financial institutions, announced that holders of Greek bonds would contribute €50 billion (about $72 billion) through 2014 to the crisis response. Specifically, they would participate, on a voluntary basis, in bond exchanges and bond rollovers (€37 billion, about 11
Image of page 12
$53 billion) and debt buybacks (€12.6 billion, about $18 billion) to lower Greek debt payments over the short-term. The IIF designed a menu of options for the bond exchanges and rollovers and expect 90% of private creditors to participate. Those that do participate are expected to take a loss of 21% in the net present value of their bond holdings. When the exchanges and swaps are carried out, the major credit rating agencies are expected to classify the Greek government as officially in default, since bondholders will not get paid in full and on time as specified in the original bond contracts. Addressing Greece’s Crisis: Progress to Date The Greek government faces government budget and current account deficits that it can no longer finance by borrowing from international capital markets. Some caution that Greece is at risk of defaulting on its debt obligations. To address this crisis, the government is pursuing a mix of fiscal austerity (government spending cuts and tax increases) and structural reforms to improve the competitiveness of the economy. Financial assistance from the other Eurozone member states and the IMF is allowing the adjustment to take place over a longer time period. Some economists have concern that despite the government’s reforms and the financial assistance from other Eurozone member states and the IMF, the Greek government may still default on or restructure its debt and/or leave the Eurozone. Amidst concerns that Greece’s crisis spreading throughout the Eurozone, the EU has announced it will make substantial resources available to vulnerable European countries.
Image of page 13
Image of page 14

You've reached the end of your free preview.

Want to read all 26 pages?

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes
A+ icon
Ask Expert Tutors