We have mentioned, in an earlier article, the report by Man Group Plc (LON:EMG) (PINK:MNGPY) (PINK:MNGPF), in which Ben Funnell, Chief Equity Strategist of GLG Partners, says that Greece is going through a Great Depression. Now the Prime Minister of Greece, Antonis Samaras, has made a similar statement while talking to former US President, Bill Clinton, as reported by Reuters.
“You had the Great Depression in the United States,” Samaras told Clinton, “This is exactly what we’re going through in Greece – it’s our version of the Great Depression.”
Clinton has criticized the strategy that relies excessively on austerity, he believes the Greek economy has to recover before it can pay its debts. He was visiting Greece as part of a group representing Greek-American businessmen.
“(It) is self-defeating… if every day people are saying this may or may not work to give us back 100 cents on the dollar, so give us more austerity today,” Clinton said in his talks with Samaras.
“People need something to look forward to when they get up in the morning – young Greeks need something to believe in so they can stake their future out here,” Clinton said.
The PM Samaras has made this statement when EU and IMF officials are set to visit Greece in the upcoming week. A package of 130-billion euro bailout money was approved for Greece by the European Union, European Central Bank and International Monetary Fund, in March of this year. The rescue was intended to reduce the massive debts incurred by Greek economy.
The terms of the rescue funds demand that Greece reduce the present budget deficit to less than 3 percent by the end of 2014, this will require further budget cuts of 12 billion euros and an increase in tax rates. By the end of 2012, the country’s GDP would have shrunk to one fifth of what is was, since the beginning of recession in 2008, the government has already axed off 17 billion euro from the national budget.
ECB has been stepping up pressure on Greece to enforce strict compliance with the regulations that are attached with the rescue money. ECB stopped accepting Greek bonds as collateral on Friday, saying that the decision will stay in place until the troika has finished review of Greece’s performance on the second installment of the adjustment program.
The impending visit by members of lender organizations will decide whether the next package of funds should be released or not. EU is also calling for more budget cuts in a country which has already seen massive reductions in wages, increased taxes, and an unemployment rate of 22.6 percent, in line with the unemployed averaging every 1 in 4 persons, in Spain. On the other hand, Greece wants a flexible package for implementing the bailout funds, as stringent austerity measures have worsened the already weakened economy. Speculations about a possible exit of Greece from EU are also rampant among analysts, as high-ranking executives in Germany and IMF are against the idea of directing any more funds to salvage the Greek economy. Greece will also be penalized in the form of reductions on the previously agreed-on bailout funds, depending on the extent of noncompliance with the fiscal targets. Germany’s Minister of Economy, Philipp Roesler, made similar comments in an interview with a ARD public television.
“I am more than skeptical, If Greece does not fulfill its requirements, there cannot be any more payments to Greece.”
Roesler is known for having a far more stringent response towards the euro crisis than Angela Merkel, German Chancellor, and Wolfgang Schaeuble, German finance minister.