Greek Debt Writeoff Requirements

Will stringent Greek debt writeoff requirements solve the problem of Greek and European debt? What will the Greek debt writeoff requirements do to the Greek economy? Will the Euro benefit from a Greek austerity plan, French austerity plan, Italian austerity plan, and austerity plans across the board in Europe? The Greek debt dilemma is really only the tip of the debt iceberg in Europe and across the globe. Because Greece is a member of the European Union, there is concern among EU members that if Greece defaults on its debt obligations that other EU nations will follow and lead to a breakup of the European Union. The other members of the EU, the European Central Bank and the International Monetary fund are pledging money to cover Greek debt obligations that come due in March of this year. One of the aspects of this scenario is a writeoff of part of the Greek debt. Greece will have less debt to pay off, hopefully a longer time to do so, and help in covering its debt obligations. But, there will be more than one price to pay.

Creditors are demanding that Greece make changes so that its economy will be more competitive as part of the Greek debt writeoff requirements. This including privatizing many government run industries and services. The Greek parliament just passed a set of very stringent austerity measures. However, they have yet to be implemented and countries such as Germany, who will obligated for a large portion of the bailout funds, are demanding implementation of these same austerity measures before bailout funds can be released. The current installment comes to about €130 billion or $172 Billion in USD. The money will be used for successive payments, the first being just under €15 Billion in late March of this year. Required cuts in spending include subscription drug benefits, pensions, and subsidies to nationalized industries. The problem for Greece will be to maintain a reasonable level of employment and collect a reasonable amount of taxes or these selfsame austerity measures will reduce the amount of money that Greece needs to pay its debts just as things are starting to look better. For Forex traders the currency rate instability of recent months may not let up until the Greek situation is stabilized.

The main point of all of this for the Forex trader is that the Greek-European-international debt dilemma is far from resolved with satisfaction of the Greek debt writeoff requirements. A recent Moody downgrade of European national debt ratings was visited on more than a dozen nations. The US saw a Capitol Hill farce last year when an otherwise routine increase of the US debt ceiling nearly caused a shutdown of the US government and resulted into US debt rating being downgraded! Forex traders will be wise to look to just how nations such as the USA are approaching their massive debt burdens. The current chairman of the US Federal Reserve, Mr. Bernanke, has developed a set of solutions dubbed the Bernanke Doctrine. A major part of this plan to keep credit flowing and maintain employment is to drive interest rates to a bare minimum This done by purchasing US Treasuries with printed money. The low interest rates help preserve a slow economic recovery. The printing of money is meant to accomplish two things. One is to replace some of the trillions of dollars of equity that evaporated during the 2008 market crash and its aftermath. The other is an intentional effort to devalue the US dollar which also reduces the value of US debt obligations. As the European Central Bank and China follow some the same principles Forex traders will wait to see which currency falls faster. The Greek debt writeoff requirements may end up as small potatoes compared to measures taken by the giant economies of the world to shuck their debt burdens.