Seeking Alpha
March 15, 2011
Conditionality: This is the magic word used with abandon by aid providers, be they wealthy eurozone nations or the IMF.
Loans granted to struggling nations -- Greece and Ireland today, and Portugal tomorrow -- are granted in exchange for the implementation of structural reforms of the recipient nations to improve their competitiveness or, to put it more bluntly, to embrace part of the German economic model.
As we can see, with the publication of the Franco-German convergence report by French MP and UMP National Secretary in charge of fiscal matters, Jérôme Chartier, (see synthesis here - pdf), a country no longer need find itself in dire straits to proactively adopt the German model of frugality.
In any case, one thing is for sure: Following the preliminary summit of European leaders this weekend, our scenario of European debt plans for PIGS nations following the same path as that of AIG in the United States is moving ever closer to fulfillment.
Greece thus benefited from an extension of debt maturities from 3 to 7.5 years, and a 1% decline in interest rates to 4.2% from 5.2%, amounting to about €6bn in savings for the Greeks. The country's earliest debt maturity has been extended to September 2014 from May 2013 with the last repayment rescheduled to May 2015. Moreover, the interest rate to be paid for the first three years has been reduced to 3.5% from 4.5% (for the time being)! The country's financing needs of €58bn for 2011 are entirely covered by the €100bn EU/IMF plan and short-term treasury issues already carried out.
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See the Franco-German convergence report (in French)
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