Is It Third-Time Lucky For Greece?

Or is the latest Greek bailout deal just too little too late?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

So it looks like it’s finally happened. The Greek people voted No, their government caved in anyway and agreed to further austerity, and a third bailout for the once-proud democracy has been agreed. At least, that’s the way it’s looking on Tuesday morning, after new Greek finance minister Euclid Tsakalotos confirmed that a broad agreement has been reached, and with the rubber-stamping by Greece’s parliament expected any day now.

What it means in the short term is that Greece should get a new €86bn injection over three years, and will be able to repay the €3.2bn that’s due by 20 August. But will it signal success in the longer term?

One of the key points of contention between Greece and the EU has been the country’s failure to make sufficient headway with its privatisation plans — €50bn was supposed to have been raised from the sell-off of state-owned assets by 2015, but nothing close to that has been achieved. That target has now been reset, to be achieved over the life of the new bailout loan, with the key difference that the sale will now be managed by an independent fund with a degree of EU oversight.

Don’t be fooled

But if you believe this is the turnaround point for the Hellenic Republic and that a rosy future is now assured, think again — at best, it’s only just the start of a very painful road back to economic health.

For one thing, the EU has been revising its economic forecast for Greece, and until the recent crisis it was actually forecasting growth! Now, horrors, the EU admits that Greece might even be back in recession. Of course Greece is in recession, and it’s going to be a hard one — that much is obvious to anyone who can see beyond the stream of deluded gobbledegook that pours out of Brussels.

Greece is now allowed to run a deficit this year (as if it had any alternative), but must target a surplus of 3.5% by 2018 and then sustain it. I’ll repeat that — a sustainable surplus of 3.5%, by 2018. Is there anyone in their right mind reading this who thinks there’s any chance of that happening?

Then there’s the level of Greece’s debt, which is expected to represent around 200% of GDP over the next couple of years. That can simply never be repaid, even though Germany (the country that has benefited from by far the largest amount of debt forgiveness in Europe over the past 100 years) insists on getting every last eurocent back.

Demands like that would condemn generations of Greeks to lives of penury, and it is unreasonable to expect the country to just suck it up while they see their richer Northern neighbours exploiting the eurozone for their own benefits.

More fudge

No, it has been fudged yet again, and unless there are material changes to Greece’s debt (which means writing off a large chunk of it, in whatever face-saving way the EU wants to word it), in another few years we’ll be right back here again with exactly the same crisis unchanged. And that will put yet more pressure on the eurozone — we’ve even started to see divisions between Germany and France over the latest crisis, and they can surely only widen if Germany continues to live its fantasy.

I still reckon it’s only a matter of time before the eurozone is rightfully consigned to history, but the real injustice is that Greece is having to suffer the pain of its death throes.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

More on Investing Articles

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

1 Warren Buffett stock I’m buying now

Coca-Cola is the fourth-largest holding in Warren Buffett’s Berkshire Hathaway. I’ll explain why I’m following Buffett and buying more.

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

I bought 4,403 Lloyds shares in June and 4,856 in September. Here’s what they’re worth now

Harvey Jones thought he was bagging a FTSE 100 bargain when he bought Lloyds shares on two occasions last year.…

Read more »

Young woman holding up three fingers
Investing Articles

I’m itching to buy these 3 hidden FTSE gems in a Stocks and Shares ISA

Harvey Jones is keen to add these three FTSE 100 companies to his Stocks and Shares ISA before April. Only…

Read more »

Close up of a group of friends enjoying a movie in the cinema
Investing Articles

How I’d try and turn just £1 a day into a fabulous £54,485 passive income for life

By investing small, regular sums in FTSE 100 shares I can potentially generate a huge passive income stream. It won't…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

I’d aim for a million buying under a dozen shares

Christopher Ruane explains why less could be more when it comes to building a share portfolio if he wants to…

Read more »

Investing Articles

Rolls-Royce shares are up over 1,000% since 2020! Am I too late to buy?

Rolls-Royce shares now cost over tenfold what they did in the firm's 2020 rights issue. Our writer thinks they may…

Read more »

Investing Articles

1 top UK growth stock for my tech portfolio in 2024

Up 30% in just one year, this growth stock looks positioned to continue on the path of substantial gains, according…

Read more »

Buffett at the BRK AGM
Investing Articles

I’d follow Warren Buffett to target effortless passive income

Warren Buffett knows a thing or two about building passive income streams. By learning from the Sage of Omaha, so…

Read more »