Greece’s borrowing rose
to 8.1%, from 6.5% 20 days earlier. According to the newspaper Ta Nea,
the decision to have recourse to the support mechanism was taken on the
afternoon of Thursday 22 April subsequent to the agreement reached between
the Prime Minister and the Minister of Finance, and after a telephone call
from the latter, Giorgos Papaconstantinou, to the US Secretary of the Treasury,
Timothy Geithner. Geithner warned ‘that if one more day were lost it could
prove catastrophic’ and that Greece ‘had no reason to wait’.3 It is difficult
to understand why the
Sarkozy, and the Chancellor of Germany,
Angela Merkel, met on 9 October in Berlin to develop a mutually acceptable
solution to these concerns. No substantive progress was made. In a common
statement they indicated they would continue discussions aimed at achieving an
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More hitches 141
all-encompassing and sustainable strategy for the recapitalisation of European
banks and the fiscal union of the Eurozone. As to the Greek problem, both
sides agreed to wait for the Troika’s report on the sustainability of the debt
before taking any
introduced, it did not fulfil the
grandiose claims previously made and it had virtually no impact. Most retail
businesses refused to acquire the special terminals for the tax card to work, and
most citizens realised that they were encumbered with processes and waiting
time when they used it. Taxpayers feared that the amount of their purchases as
registered through the tax card could be used against them as proof of income
higher than what they had declared. Thus the tax card fell into disuse.
Criticism of the government was dealt with by assigning responsibility for
ominous precedent, which
might encourage other nations to seek a comparable solution to their sovereign
The Greek government did not appear to hold a clear position. It neither
defended the existing agreement of 21 July, nor advocated a deeper haircut.
Either it did not want to antagonise the Greek banks, or else it was waiting
for information on the wider ramifications of any such proposal, for instance
on how the recapitalisation of the banks would be financed. On the Prime
Minister’s return from Brussels, on 14 October, the newspaper Ta Nea
more time, most probably up to the end of 2011,
provided the Greek side takes measures that the Commission finds convincing’.
This is indicative. The crisis did not wait for 2011. It had arrived, dramatically, in
9 See D. Mitropoulos, ‘How the deficit sank us’, Ta Nea, 17–18 March 2012.
10 Vasilis Zeras, Economiki Kathimerini, 29 November 2009, p. 3.
11 During the period of preparation for the 2004 Olympic Games it fluctuated around
45% of GDP, despite increased expenses. Average expenses from 1990 to 2007 were
around 44.6% of GDP.
Merrill Lynch were all fined; Barclays
rejected an early settlement and said it wanted to wait for a
coordinated settlement with other regulators.
10.5 Nature of forex
Four types of market
transactions can be distinguished:
outright forward transactions
than waiting for the end of the day.
The idea of real-time gross settlement is to avoid settlement risk
through the knock-on effects of the failure of a counter-party. One
example of this risk is provided by the Herstatt bank failure in
1974, when, because of time zone differences, customers with some
foreign exchange contracts were left unpaid, although they had
investment remains the principal shortcoming in the effort to deal
with the effects of the crisis in Greece today. Owing to the turmoil, investors
are afraid of losing their money. They are either avoiding Greece altogether or
are waiting for the return of more stable conditions for investment. Short-term
speculative investments do little to finance anything in the way of recovery or a
return to growth.
For growth to return, there needs to be absolute clarity regarding Greece’s
future in the Eurozone; only then will it be possible for businesses to plan,
and weigh the
banks in the event of a run. Until insolvency is declared, the bank
is obliged to pay out the full amount of any deposit withdrawn. Once
insolvency is declared, the depositors must wait for realisation of
the bank’s assets and, in the company of other creditors, for
their claims to be assessed by the courts. Thus, in the event of a
rumour of difficulties being faced by a bank, there is likely to be