Top Ten Points on Greek Bailout Situation:
- E110 billion over three years.
- E80 billion from European Union members.
- E30 billion from IMF and they will vote this week to approve
- E30 billion more of austerity cuts from Greece.
- 2014 is when Greece must meet 3% deficit to GDP
- ECB to continue to accept Greek debt to repo
- Germany must vote to approve deal this week.
- Greek unions to strike on Wednesday
- Questions arise over who’s next: Portugal, Spain, Italy, Ireland
- The loans to Greece will be at 5%.
A bit of perspective, this is the largest country bailout ever attempted and is twice as large as the previous largest bailout. In 1997, South Korea received $58 billion from donors including the IMF during the Asian financial crisis. South Korea has a population that is nearly five times the size of Greece.
As I wrote last Friday, the Germans have to vote to approve E20 billion in supports for the package and it’s likely to be a contentious bit of political theatre. The Euro has failed to sustain a rally on questions over whether Greece will submit to the austerity and whether this is the end of the bailouts. The funds will flow eventually to Greece to ensure they don’t have to refund on May 19th at double digit rates.
The European Union must now think beyond this crisis to fix their constitution.
They have now created a massive moral hazard as bad behavior gets bailed out, but there is no rule enforcement to stop it.
The entire premise of the EMU is in question and must be resolved.
Either the EU integrates further or dissolves.
As long as this question remains, a dark cloud will remain over the entire continent and markets will be looking for rain.
Andrew B. BuschDirector, Global Currency and Public Policy Strategist at BMO Capital Markets, a recognized expert on the world financial markets and how these markets are impacted by political events, and a frequent CNBC contributor. You can comment on his piece and reach him hereand you can follow him on Twitter at http://twitter.com/abusch.