11th hour EU 4 month extension agreement with Greece positive but details sketchy:Primary surplus commitment sensibly reduced

The negotiators from the euro zone European union on behalf of the nineteen member countries reached a  last minute deal with the Greek government to extend the existing arrangement due to expire on February 28 for a further 4 months to enable further negotiations on establishing a new framework to proceed. The new government’s margin to manoeuvre has been restricted somewhat but it can reduce the size of the primary surplus it is forced to run as a percentage of the GDP and some of its anti austerity measures can be implemented though not all of them. Once further details emerge we will be able to better assess whether the Greek  Government has properly escaped from the straight jacket they were in.

Greek bond prices rose slightly so that the interest rate on them fell to 9.89 %. This is still a punitive rate for Greece to have too pay to finance its debt particularly since such a large percentage of the debt is owed to the IMF, the ECB and the special EU emergency financial fund. Clearly all these institutions could and should receive a lower rate of interest instead of one that borders on usury when the rate on German ten year government  bonds is close to zero at 0.36 %. Usurious interest rates and overburdened debt loads are an ancient story in Greece. Both Aristotle and Engels commented upon it. Solon in the sixth century B.C. banned debt bondage and limited the size of land holdings.(See James Macdonald A Free Nation Deep in Debt, N.Y., Farrar, Straus and Giroux, 2003. p.26)


About haroldchorneyeconomist

I am Professor of political economy at Concordia university in Montréal, Québec, Canada. I received my B.A.Hons (econ.&poli sci) from the University of Manitoba. I also completed my M.A. degree in economics there. Went on to spend two years at the London School of Economics as a Ph.D. student in economics and then completed my Ph.D. in political economy at the University of Toronto. Was named a John W.Dafoe fellow, a CMHC fellow and a Canada Council fellow. I also was named a Woodrow Wilson fellow in 1968 after completing my first class honours undergraduate degree. Worked as an economist in the area of education, labour economics and as the senior economist with the Manitoba Housing and Renewal Corporation for the Government of Manitoba from 1972 to 1978. I also have worked as an economic consultant for MDT socio-economic consultants and have been consulted on urban planning, health policy, linguistic duality and public sector finance questions by the governments of Manitoba, Saskatchewan,the cities of Regina and Saskatoon, Ontario and the Federal government of Canada. I have also been consulted by senior leaders of the British Labour party, MPs from the Progressive Conservative party, the Liberal party and the New Democrats on economic policy questions. Members of the Government of France under the Presidency of Francois Mitterand discussed my work on public sector deficits. I have also run for elected office at the municipal level. I first began to write about quantitative easing as a useful policy option during the early 1980s.
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