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Seeking a new solution

are far greater than any possible benefits’.5 The Greek government equally maintained its position that ‘there is absolutely no possibility that Greek debt will be restructured’.6 Instead, Athens made calls for a much greater period of grace, limiting current liabilities to the payment of interest, while the full repayment of bonds held by the private sector would be made over many years. The discussions that took place concerning such proposals, according to Greek accounts, were not met with any interest in Brussels. The German news magazine Der Spiegel noted

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government continued to appear optimistic. It believed that the Greek problem was a small dimension of much deeper European and international concerns. Greece could ‘function as the starting point for transcending the crisis’.2 Hellenic analysis viewed developments after the European Council summit favourably; it had created the conditions ‘for the exchange of Greek bonds’. The Prime Minister made telephone calls to European officials and, ‘according to informed sources, the dead line for completion of the procedure concerning the private sector involvement had been set

in The European debt crisis
An obstacle race

9 Implementing the Memorandum: an obstacle race In 2010 the Greek government devoted itself to extending the repayment schedule of the first loan made under the terms of the first Memorandum. The Prime Minister put the matter ‘officially on the negotiating table’ at his meeting with the President of France in Paris in November of that year. This initiative was presented as a significant move. Under the circumstances prevailing at the time, it was rather self-evident that an extension would be granted. When creditors realise that they will soon be obliged to

in The European debt crisis

as the agreement over a new agricultural policy and the completion of the European Constitution all contributed to Greece’s growing political capital. In March 2004 the new New Democracy government took charge of a country which was very different from that of its recent past, a country with potential and new infrastructure, ready to maintain its high levels of growth.1 It took charge of a country which still had 70% of the 3rd European Structural Fund Programmes for Greece at its disposal, the largest growth programme ever in the history of Greece. It had means

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4 Being in denial In the October 2009 elections PASOK secured a resounding victory over New Democracy.1 The result scuppered New Democracy’s plan for an expedient return to power. The result of these elections was instrumental in the ad­mission and revelation of the true scope of Greece’s financial woes. On 21 October the Minister of Finance informed the European Commission that at the end of 2009 the deficit would reach 12.5% of GDP, in excess of two times the figure claimed by the previous government (6%).2 Further revisions followed,3 till a figure for the

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6 The bitter truth The only thing that Greece gained was a little breathing space. But the govern­ ment did not realise that. They thought they had achieved a great success. Many celebrated: they believed the interest rate crisis had been resolved, Germany had been obliged to yield and the IMF would not be dealing in detail with the Greek problem. The government’s policy of giving absolute priority to the positive spin of its policy, of glorifying its actions and downplaying the problems served only to obscure the real situation. The government itself was led

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18 A flicker of hope Public opinion welcomed with relief the new coalition government. Opinion polls indicated the new Prime Minister’s popularity rating was high. In a vote of confidence on 15 November 2011 the government received 255 votes of support from the 300 Members of Parliament. The climate improved significantly. Demonstrations on the streets of Athens were not as frequent, and violent confrontations with the police subsided. There was hope that, despite the temporary nature of the government, it would be able to improve the situation decisively. The

in The European debt crisis
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Crisis, reform and recovery

low inflation also led to a gradual decline in nominal interest rates.5 Third, the real exchange rate was not significantly overvalued. In fact, in the three years prior to the crisis, the real exchange rate was essentially flat. Fourth, the gross domestic savings remained high, exceeding 30 per cent in 1995–96. Fifth, the fiscal deficit, which was about 2.5 per cent of GDP in the early 1980s, was turned into a surplus in 1993 – a position it maintained on the eve of the crisis. Sixth, the government budget was close to being in balance, and between 1990 and 1995, Korea

in The Asian financial crisis

close political circle. What would happen should such support not be forthcoming? Would the Prime Minister tender his resignation, or would he continue to exercise his power despite the fallout such a vote would inevitably provoke? In assessing their preferences with regard to a referendum, the electorate’s voting is determined by government approval ratings and the socioeconomic context in which the vote is to take place. These conditions are far more causally significant to the voting behaviour of the electorate than the terms of the question. The rejection of the

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Crisis, reform and recovery

to be traded would be sufficient to ward off contagion. The Indonesian government, which received much praise for its swift and decisive response to the crisis, went to great lengths to assure jittery investors “that Indonesia was not Thailand.” Then the unthinkable happened. Indonesia suddenly succumbed to the contagion, and measured by the magnitude of currency depreciation and contraction of economic activity, it emerged as the most serious casualty of Asia’s financial crisis. In fact, with an economic contraction of 15 per cent in output in 1998, Indonesia

in The Asian financial crisis