30 January 2015   Leave a comment

The new Greek government has announced that it will not negotiate with the “troika” (the European Union, the International Monetary Fund, and the European Central Bank) on an extension of the current loan repayment program.  What this means in very concrete terms is that the current owners of Greek debt (which are banks and sovereign governments like France or Germany) will not be repaid on schedule or in the full amount they were expecting.  The “troika” was going to lend money to Greece so that these repayments could be made.  If this turns out to be what actually happens, then there will be two “victims”.  The first victim will be the Greek people who will be unable to borrow any new money so that the Greek economy will become a cash only economy.  The second victim will be the owners of Greek debt: the banks and governments who were expecting money.  The governments can certainly handle a shortfall–they will simply increase taxes or cut services to manage the loss.   The banks, however, may suffer a loss of credibility if their depositors believe that the banks don’t have enough money to both return their (the depositors) full deposits and to cover their losses (from the lost Greek payments) simultaneously.  In other words, the banks may collapse.  From the view of some analysts, the real issue is whether the banks should receive full payment at the cost of extreme austerity in Greece.

The African Union has selected the leader of Zimbabwe, Robert Mugabe, as its next chairman.  Mugabe was a true hero in the African liberation movement and will always be remembered for his role in that important struggle.  Nonetheless, he has been the leader of Zimbabwe since 1980 and has hung on to power through ruthlessness and corruption.   His selection does not serve the African Union well.

 

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Posted January 31, 2015 by vferraro1971 in World Politics

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