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There’s a lot of ideas how to keep Greece from going bust and try to recover, but the problem is they don’t add up and the math doesn’t work, many world press reports say.

Some excerpts:

Another Bright Idea to Save Greece That Won’t Work

Forbes – Tim Worstall

With so many people struggling to come up with a solution to the Greek problem we’re obviously going to end up with a lot of ideas that seems as if they might work but don’t in fact manage to solve the problem.

So it is with this idea that perhaps Greece could issue a temporary currency, or special bonds, a bit like California’s IOU bonds of a couple of years ago say. This would work in one sense: if people would accept them as being worth money then Greece can indeed pay its bills in this manner.

But this won’t work in another and more important manner. Which is that everyone’s trying to get Greece to stop borrowing more money and instead start paying back what it already owes.

And creating a new currency, or issuing a new form of bond, is equivalent to new borrowing. so, it doesn’t solve the problem …

Think of it this way: you’ve no cash today but you get paid next week. You ask the local bar if they’ll run a tab for you. That’s great, you’ve delayed payment until you get paid.

Your liquidity problem is solved. If you write them an IOU, sign a note or draw a new banknote, makes no difference, you’ve solved your liquidity problem.

But what if your actual problem is a solvency one. Say that you did this not for a few cold brewskis but instead for a few cases of Dom Perignon.

When you’re earning minimum wage. You’re never going to be able to pay that wine bill however long the bar agrees to wait for payment. You’ve just not got enough cash coming in in the future.

And the point is that Greece is in a solvency situation here, not a liquidity one. That’s what everyone means when they say that the debt burden will have to be cut: Greece doesn’t have and won’t have enough money to pay it all off.

So, issuing debt in a slightly disguised form doesn’t solve that problem, does it? Because some new form of debt solves a liquidity problem but not a solvency one.

Schaeuble Says Greece Playing Chicken With Default Risk

Bloomberg – Eleni Chrepa

German Finance Minister Wolfgang Schaeuble warned that governments can sometimes default by accident, in a jab at Greek officials still holding out for a better deal from creditors as their cash supplies run critically low.

Greece is preparing for a meeting of euro-region finance ministers on Monday with the European Central Bank threatening to restrict the country’s access to bank funding unless there’s progress toward an aid deal. Greece’s creditors say the government’s plans for fixing the economy aren’t yet detailed enough to justify more financial support.

“Experience elsewhere in the world has shown that a country can suddenly become unable to pay its bills,” Schaeuble said in an interview with Frankfurter Allgemeine Sonntagszeitung published Saturday. Schaeuble said he’ll do everything he can to keep Greece in the euro. “If it fails, it won’t be because of us,” he added.

Greece’s Deputy Foreign Minister Euclid Tsakalotos, who is in charge of negotiations, said “any delay in achieving a compromise has to do with one and only one reason, and this is the political differences between the government and the institutions.” His comments were made in an interview with the daily newspaper Avgi.

The Greek government, elected in January on a pledge to end austerity, has been resisting European pressure to comply with the terms of the country’s 2012 bailout. As Prime Minister Alexis Tsipras seeks a way to release aid without breaking his promise to voters, Athens has been forced into increasingly desperate measures to meet the state’s obligations.

Officials from Greece, the euro area and the International Monetary Fund are holding talks in Brussels this weekend, while Tsipras called a meeting of his governing council in Athens for midday Sunday.

Some ECB Governing Council members are demanding tighter restrictions on Greece’s access to the central bank’s emergency liquidity facility because the country’s financial system might not be sufficiently solvent.

“European institutions plus the IMF and Greek authorities are trying to find a solution, but the solution is in the hands of Greek authorities,” European Commission Vice President Jyrki Katainen said.

Making Sense of the Options for Greece

Reuters – Hugo Dixon 

Greece seems to lack a strategy for extricating itself from its parlous state.

Not only does the government, led by Alexis Tsipras, lack a credible plan for reaching agreement with its eurozone creditors and the International Monetary Fund, it doesn’t seem to have a thought-out fallback plan of how to default while containing the damage.

Greek financial markets have perked up in the past few weeks, largely because Yanis Varoufakis, the combative finance minister, has been sidelined from discussions with the creditors.

The new composition of the negotiating team has led to more productive talks, but there is still a mountain to climb and little to no chance of a deal when eurozone finance ministers . meet on Monday

When Mr. Tsipras took office in January, he seemed to have thought he could extract more cash from his creditors as well as secure relief on Athens’s debts without undertaking serious reforms. This was pie in the sky.

The government also didn’t initially factor into its calculations how badly the economy would be damaged by months of political uncertainty and a liquidity crisis. In November, the European Commission was predicting growth of 2.9 percent this year. Last week, it cut that to 0.5 percent, and even that could prove optimistic.

The deteriorating economy means Athens will find it a lot harder to balance its books. Even if its creditors lower the budget target for this year, the government will have to introduce more austerity measures, and that will further damage the economy …

The problem is not merely a matter of time. It is also a matter of money. Given Greece’s deteriorating economy, the next bailout will require more than previously estimated — perhaps topping €50 billion. It will be hard to persuade other eurozone nations to cough up this sort of cash, not least because good will toward Greece has almost vanished.

Given such a gloomy prognosis, it is important to examine alternatives. There are two: default and leave the euro, or default and stay in the single currency …

If Athens defaulted, it would also have to live within its means. Although the government would no longer need to find cash to pay its creditors, it would still have to cut salaries and pensions because tax receipts would fall in line with the deteriorating economy.

 

The post World Press View: Anyone Know How to Save Greece? appeared first on The National Herald.

Source: The National Herald
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