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Another bailout for Greece
| DATE: 21 February 2012 |
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| BY: Mzolisi Witbooi |
Eurozone ministers approve a multi-billion euro loan package to avert a Greek tragedy.
Finance ministers of the eurozone have approved another bailout for the beleaguered Greek nation following 13 hours of intense discussions in the Belgian capital, Brussels. While the bailout is expected to resolve the debt-laden country’s immediate repayment needs, it’s still unlikely that it would have a positive effect on the dire state of their economy.
The €130 billion (about R1,3 trillion) bailout will reduce Greece’s government debt from around 160% of the country’s GDP to just over 120% by 2020 – the maximum level considered acceptable and sustainable by the International Monetary Fund. The first rescue fund of €110 billion (about R1,1 trillion) in 2010 was not enough to avert the crisis in Greece. The rescue plan also resulted in the write off of €100 billion (about R1,1 trillion) of debt with private lenders accepting a 70% reduction in what Greece owes them. In return, they receive cash and new bonds that are expected to mature in 30 years. Had the country failed to secure before March 20, it would've been expected to make repayments in the region of €14,4 billion (about R146 billion) and it would have been declared bankrupt.
Back on SA shores, Business Unity South Africa believes that the impact of the eurozone crisis on our local economy will definitely demand adjustments to Finance Minister Pravin Gordhan’s 2012 national budget. Their concerns are within reason, because the European Union, as a bloc, is SA’s largest trading partner. Not only do European consumers import a great deal of South African goods, SA also has strong connections with a number of major European economies, such as France and Germany.
There are concerns that as eurozone governments reduce their expenditure, business conditions would deteriorate and this would result into trading partners such as SA suffering the brunt of unemployment caused by less demand in their products.
ADDITIONAL SOURCES: www.reuters.com, www.bbc.co.uk
