Europe kicks the can down the road, while Athens continues to burn
Greece has finally secured a new $170 billion loan from its European landlords, and the terms are just as
unrealistic and doomed-to-fail as you expected. The fact that the country requires a second bailout that's practically the size of its economy -- now crashing through $270 billion and still falling* -- tells you what you need to know about the hopelessness of Greece.
The bailout plan offers financial assistance to Greece at sweetheart terms and asks bondholders to accept a 50 percent scalping. But the object of all this pain -- stabilizing Greece's debt at 120 percent of GDP by 2020 -- relies on fairy-tale growth figures that assume the Greek Depression will stop accelerating some time starting ... yesterday. Here's the fantasy chart, courtesy of Felix Salmon:
Check out that recovery line. It's as if somebody took a ruler and drew a random sharp angle between negative-7% growth and positive-3% growth. (When all else fails, break out the hope and protractors!) Meanwhile, on planet Earth, Greece's recession is getting worse with each passing quarter. The most highly titrated doses of austerity haven't set in, yet. The honest prognosis is for the Greek Depression to deepen, not mitigate, in the next year. For the economy to stabilize within two years would require the services of the Holy Trinity, not the troika.