Ahead of today’s EU summit, Open Europe has published a new briefing arguing that the second Greek bailout is bad for Greece and bad for eurozone taxpayers. The briefing notes that of the total amount (€282.2bn) that is entailed in the various measures now on the table to save Greece – through the bailouts and the ECB – only €159.5bn, or 57% will actually go to Greece itself. The rest will go to banks and other bondholders. Furthermore, immediately following the restructuring, Greece’s debt to GDP will still be 161%, a reduction of only 2% compared to where it is now. On top of this Greece has to undertake extensive budget cuts amounting to 20% of GDP in total – a level which no other country has even attempted in recent history.
By 2015, once the first and second Greek bailouts have been completed, as much as 85% will be owned by taxpayer-backed institutions (EU/IMF/ECB).This means that in the event of a likely default, a huge chunk of the losses will fall on European taxpayers, potentially leading to significant political fallout in countries such as Finland, the Netherlands and Germany. The briefing concludes that, given the sizeable debt relief needed in Greece, a fuller coercive restructuring would have been a simpler and more effective option from the start and should still be pursued.
To read the full briefing click here.