A default by Greece, that is to say they not paying the instalments due on their debt, obtained from the ECB, the IMF and other international creditors (including Britain) would have the affect of further austerity in Britain and other countries.
Mr David Cameron,the British Prime Minister, stated that a Grexit or default by Greece may mean the reduction of state benefits and pensions in Britain by ten percent. So a Greek default would be bad news for us all. I imagine it would make a similar impact in all other countries.
So for everybody's sake, including Greece, the best scenario would be the continuation of repayments from them to the creditors. This would keep their creditworthiness intact, and allow them to import the oil and gas and good and technology that they need for everyday use.
At stake that would affect all the world economies is the 270 Billion Euros credit already extended to Greece, which has enabled them to keep going, feeding their people and creating jobs and enterprises. Their economy registered a growth of 0.7percent last quarter, the first in so many years, and it may be the green shoots of Recovery that everyone prays for. The Greek economy has turned the corner to growth and prosperity, and I would suggest that the last tranche of some 7 Billion Euros that is being held back should be forwarded to them, minus the 1.3 Billion that are now due to the creditors. On a huge loan of 270 billion, that cannot be an exorbitant amount, although in a tight situation anything would seem exorbitant. The Greek finances are very tight at the moment, as any fool can understand, so it would be august and generous of the IMF-ECB and consortium to give them the funds they need to roll the economy forward. As mentioned, the Greek economy is showing the first signs of improvements, and now is the best time to extend them the help they need to work their way out of the longest recession to hit any nation, and make their nation bloom to the happiness of their people.
Clearly, without the tranche from the creditors, Greece may not be able to service their debt, and that will lead to a default, with ramifications for the Euro, the Euro Area, the European Union and the world at large.
My figures suggest that it was about 250 Billion that went into the high price of Oil that gave the world the last recession, starting in October 2008, from which the world has just about recovered - helped by the lower price of Oil. As a corollary, I would suggest that a Greek default may induce a similar situation, and that would be bad bad news for everybody. Therefore, I would suggest to the Euro Area Ministers to sit down and offer Greece the finance they need, with no conditions which they are not willing to accept. Perhaps the only condition should be that they should deploy the capital, and use the process of work expansion and creation of new industries (such as solar power, which they could export to other nations), together with mining, agriculture, fishing, etc etc. That way lies hope for their young people. I always feel sad when I hear so many young talented university educated people are sitting idle in Greece, because funds are not available to implement their ideas. Europe must feel this as their moral duty towards our Greek brothers and sisters, and help them build on their Recovery.
And that, ladies and gentlemen, would prove to the benefit of all of us too. Then the European Union can be justly proud of their support for each other, and their solidarity, their unity. The Euro then would also strengthen, and mature into a Reserve Currency. Now is the time when all these principles are being put to the test.
I pray all of us come out of this situation stronger. I hope the German Finance Minister will show continued generosity of spirit, which has helped Greece recover over the last few years, immediately after Mme Merkel decided to help Mr Papandreou. Having brought their Recovery so far, we should not fail them at this stage. And it would make great good sense for everybody.
Durudarshan H. Dadlani