# The Greek Bailout - what does it mean?



## LouisCribben (26 Apr 2010)

Could someone explain (for dummies) what the Greek Bailout means.

OK, the Greeks have a massive deficit, are spending more that they are taking in from taxation, and can't service their loans

Does a bailout mean that someone is going to pay their debts for them ?
Are they getting a freebie - is someone going to wipe out their loans for them ?

Who bears the cost of the bailout ?


----------



## pudds (26 Apr 2010)

'taxpayers' around the globe I would say........as usual


----------



## shanegl (27 Apr 2010)

It would mean cheaper (at below market rates) funding for Greece.

The cost is borne by the taxpayer, as the lenders will not be charging Greece sufficient interest to compensate for the risk of default.



There are other possible negative consequences, e.g. moral hazard.


----------



## z107 (27 Apr 2010)

> There are other possible negative consequences, e.g. moral hazard.


and also who's next?
Spain, Portugal and Ireland will be queuing up to have a go at it. When will Germany call it a day, and pull out of the Euro?

Interesting times ahead.


----------



## Sunny (27 Apr 2010)

A bailout is probably the wrong term. Suggests they are going to get the money for free. Nobody is writing off their debts. The conditions attached to the loans will make our budgets in recent times positively generous. Thousands of public sector jobs are to be lost. Public sector pensions are to be slashed. There are tax increases and moves to combat tax evasion. The labour market is to be liberised meaning private sector workers will be able to be fired and restrictions on part time work are to be lifted. 

They might only pay 5% interest but the cost to the Greek people in the short term will be huge. They are trying to cut the deficit by 6% in each of the next two years.


----------



## LouisCribben (27 Apr 2010)

shanegl said:


> The cost is borne by the taxpayer, as the lenders will not be charging Greece sufficient interest to compensate for the risk of default.


 
how can lenders be enticed to lend to Greece at low rates ?


Am I correct in saying that the only cost to the EU of the bailout is the risk that Greece goes bankrupt, in which case EU would have to repay Greece's loans ?


----------



## shanegl (27 Apr 2010)

LouisCribben said:


> how can lenders be enticed to lend to Greece at low rates ?
> 
> 
> Am I correct in saying that the only cost to the EU of the bailout is the risk that Greece goes bankrupt, in which case EU would have to repay Greece's loans ?



The lenders would be countries in the EU and the IMF, they dont need to be enticed. If Greece defaults, no-one will be paying their loans for them, the lenders (EU/IMF) will lose their money.


----------



## LouisCribben (27 Apr 2010)

Will Ireland lend Greece money ?
Presumably, with our 60million ish deficit every day, we dont have any money to lend


----------



## jpd (27 Apr 2010)

I think we're in for € 450,000,000 - I suppose this will have to be borrowed by the NTMA

Also, a lot of the existing debt is held by Eurpoean banks, so the EU Govts are more or less forced to help Greece or else there will be another big hole in the banks to be filled ( by the taxpayer, of course!)


----------



## LouisCribben (27 Apr 2010)

So lets get this straight, we are going to borrow 450'000'000 at a certain %, and lend the same money to the Greeks, at a lower %.
We'll be a few million euro out of pocket.


Anyone got a link as to how much each EU country will lend Greece ?


----------



## Purple (28 Apr 2010)

Will the downgrade of Greek bonds to junk status by S&P and the yield on their two year bonds reaching over 14.5% put pressure on Irelands ability to raise money (are we next)?


----------



## zztop (4 May 2010)

So now its 1.3bn? from a country thats nearly as bad.
Who is fooling who..


----------



## UptheDeise (4 May 2010)

Get yourself a class of whiskey and make sure you're sitting down before clicking on this link: http://www.nytimes.com/interactive/2010/05/02/weekinreview/02marsh.html


----------



## Purple (4 May 2010)

Where does the $867 Billion come from?


----------



## UptheDeise (4 May 2010)

Purple said:


> Where does the $867 Billion come from?


 
I guess if you exclude all the money by foreign banks in the IFSC the figure wouldn't be as high. Still scary though.


----------



## Purple (4 May 2010)

UptheDeise said:


> I guess if you exclude all the money by foreign banks in the IFSC the figure wouldn't be as high. Still scary though.



So what's the figure for total private debt plus total government and government guaranteed debt?


----------



## UptheDeise (4 May 2010)

Let me direct you to this site here. It has plenty of charts and figures.

http://trueeconomics.blogspot.com/


----------



## Purple (4 May 2010)

Great link!


----------

