Down To The Wire! Again!

The Greeks may have their financing after all!  PM Alexis Tsipras has forwarded to Greece's creditors a list of proposed pension reforms and tax increases in an attempt to get up to €53.5bn in new loans to cover debts until 2018.  In fact, the new bailout could be as high as €74bn, because Greece wants to restructure (a.k.a. write off..) much of its debt, which it says is unsustainable.  The proposal appears to have been well-received by numerous Eurozone members, including Italy and France. The Germans are insisting that they will not agree to more debt reduction that causes losses to German interests.  Regardless, the talks are still on, and Greece may yet have a future in the Eurozone.

Greece has already received in excess of €200bn over the last five years to stave off bankruptcy.  As it stands, Greece is technically in default, and cannot finance its debt on its own.  If it gets a new bailout, the vast majority of cash could go to paying interest on its existing debt.  Bonus cheques for bankers throughout the Eurozone have probably already been drawn up.

So what do we know?  

We know that Greece is bankrupt.  Without someone coming forward to either fund or accept a massive write-down of Greece's debt, it will never finance let alone pay this debt on its own.  

We know that Europe is still not ready to face the consequences of bankrupt countries in its midst, preferring instead to send good money after bad in the hopes that all will somehow be well at some point down the road.  The previous two massive bailouts to Greece assumed significant economic growth that would drive new tax revenues and make everything alright.  It never happened.  Instead, Greece has experienced an economic collapse that rivals The Great Depression.

We know that this crisis will be repeated again, either in Greece, or in other countries like Portugal or Spain, likely quite soon. As noted, Europe has no plan for situations like this.

We know that Greek voters rejected the very type of austerity that their government just recommended to Greece's creditors.  Maybe the fact that the austerity proposal came from Greece and not from the creditors will satisfy the needs of Greek pride and sovereignty - no one knows. What does seem clear is that this proposal may imperil the present Greek administration, possibly adding a period of political chaos in Greece to this sad and complex situation.

Finally, we know that the Germans and other solvent European countries have seriously considered and likely planned for the Grexit over the last few weeks, if not months.  The hitherto unthinkable has now been thoroughly thought through.  The Greeks just voted "no" to austerity. The Germans and other solvent nations such as Finland may be about to vote "no" to Greece's continued membership in the Eurozone, by ramping up demands for austerity to levels that no Greek government can accept.  The Greeks aren't the only poker players in Europe.