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I was surprised to hear that number, $160 billion. Originally I had heard that it was only going to be somewhere around $30-40 billion. I also found this section interesting:
"Greece will be required to cut civil servants' salaries, freeze their pay increases, reduce their pension payments, change tax rates and increase the value-added tax consumers pay on purchases, according to Ilias Iliopoulos, the general secretary of the public sector union ADEDY."
When the U.S. government bailed out Wall St. and the Big Three, we did not see these types of caveats on our own money. It appears we are more protective of our money overseas. That being said, are you thrilled we are going to be dumping approximately $96 billion (60%, I am guessing that's how much we will contribute since the U.S. has the 60% stake in the IMF) into Greece? Will the Greek people be thrilled with these foreign restrictions? We already have seen how much they do not like any kind of reform.
If they truly want the aid, I think they're going to have to take the restrictions and not complain. When it's not your money, and someone else is sharing from their pockets, you're under their terms. If we didn't put certain restrictions on it, how are we to know that they wouldn't just take the money and ignore their real need to reform? They certainly won't be happy, but they can't really complain if they really want the help.
ReplyDeleteThis reminds me of the example we read about in 13 Bankers. We tell other countries to act more like the U.S. Economy when we bail them out, yet we are hypocrites and don't take our own advice. What would happen if the U.S. had to increase the value-added tax consumers pay on purchases... but yet again I guess Greece and the U.S. are in different situations.
ReplyDeleteActually, if I recall correctly, in the cases where the government took significant stakes in the companies they did place simple caveats on the money. Executive pay was capped and the companies were forced to restructure (the companies that spring to mind are GM and Citi although I didn't fact check this post). As soon as those companies paid back (which GM has yet to do) they could do whatever they wanted.
ReplyDeleteIn the case of Greece though these kinds of restrictions could have wide ranging impacts on the government long term. I don't know what the answer is but this doesn't seem like it to me.
I completely agree with Dana, Greece has no choice but to take theses caveats and abide by them in order to receive this money. Otherwise I am pretty sure they will fail and default on their money. It is just surprising that we have rising debt and are coming out of a financial crisis are we are still just pumping out more and more money to help bail people out. So it makes it seem that if we ever fail everyone else is pretty much screwed.
ReplyDeleteGreece really has no option but to take the restrictions because if they don't take the restrictions then they won't get failed out and they will fail. I just hope the US thinks its worth it to lend money out.
ReplyDeleteReally interesting that the Greek bailout costs less than the AIG bailout. Shows you how vital America and American institutions are in the scheme of the world economy.
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