Lloyds: Greek debt has to be restructured
Economists at Lloyds TSB Corporate Markets note that to get the EU support Greek authorities promised last year to do fiscal tightening, but they haven’t done it. So, the country’s officials are once again promising to reduce the budget. The question is, given the increasing opposition to the cuts from Greece’s population, if the government is able to push through the austerity measures.
The analysts say that Greece doesn’t grow fast enough to generate the tax revenues. As the country needs money there certainly has to be some restructuring – it doesn’t have to be the outright default, though it depends on how you define the notion of “defaultâ€. Rating agencies, for instance, say that any sort of “reprofiling†means default, notes Lloyds. The specialists think that in the long run restructuring will help both Greece and euro zone. According to the bank, the quicker the proper mechanism is put in place, the better.
The current crisis in Europe is not a matter of confidence to the EMU as some might think, but the problem of relatively small economies, think the strategists. But as these countries still can’t meet their payments unless the debt is written off, the debt restructuring will actually ease the pressure on euro and reduce contagion effects.
According to Lloyds, the world’s economy is quite healthy at the moment and if to conduct reforms in the euro area, it’s time to do that now. The European policymakers need to be willing to act toughly dealing with the crisis in 3 countries in particular – Greece, Portugal and Ireland.