Catch21 - Our Charity ArmCatch21 is a charitable production company set up in 2005 which trains young people to make videos and engage with their communities.Catch Creative - Our Video Production ArmCatch Creative offers a complete video production service, from Conception to Distribution.Catch EngagementCatch Engagement is the new video interaction platform from Catch21 which allows you to run a campaign using both user generated films as well as professionally shot ones which are displayed via Video 'Walls'. Catch Engagement is all about using films to build an online community - welcome to the future of video.

We shoot cutting edge videos and provide a forum to give people a voice.
Engagement. Discussion. Empowerment.


All content featured on our charity site is produced by young volunteers with the support and mentoring of our professional production team.

Europe no image

Published on December 16th, 2012 | by Katharina Obermeier
Image © [caption id="" align="alignnone" width="566"] © Rachel Knickmeyer/ Greek Flag / Flickr[/caption]   After much posturing and wrangling, eurozone finance ministers and the International Monetary Fund (IMF) recently came to an agreement on a deal for Greece which will allow the release of the next loan instalment of €43.7bn to the cash-strapped country. Key to the agreement was the passage of Greece’s budget for 2013 and a wide array of spending cuts, tax rises and labour reforms adopted by the Greek Parliament in early November against a backdrop of protests and violent clashes. Harsh as the austerity measures adopted are, they helped convince wary eurozone governments to step in and save the country from bankruptcy. While a further loan instalment may appear to be nothing more than a band-aid solution to an overwhelming problem, the deal actually goes significantly further than that. Eurozone ministers pledged to lower the interest rate on loans to the Greek government, give Greece more time to pay back interest on the loans it received, and sign over €11bn generated in profits from the purchasing of Greek government bonds by the European Central Bank. All in all, these measures will reduce the Greek debt (around €340bn currently) by approximately €40bn. Even more significant than this indirect debt writedown is the statement that the eurozone commits itself to lowering Greek debt below 110% of GDP by 2022, with the implicit acknowledgement that international lenders may forgive further debt if Greece fails to achieve this goal on its own. The concept of further debt writedowns is all the more interesting considering that earlier this year, Greece was already granted the questionable honour of the largest government debt restructuring in history as part of its second bail-out by the EU and the IMF. Seen in a broader international context, Greece was already incredibly fortunate to have so much of its debt written off in the first place, and now may be in for more. Other countries are not so lucky: as pointed out by development activists, many poorer, less developed countries suffering from more crippling debt and worse conditions than Greece are excluded from initiatives such as the IMF and World Bank Heavily Indebted Poor Countries (HIPC) debt relief. So why have international lenders been more benevolent towards Greece than to other countries which are more in need of debt relief? Naturally there are many factors that play into this, including issues such as levels of democracy and corruption in the various countries. Creditors fear that by writing off debt for governments which are unable or unwilling to learn from past mistakes and implement appropriate reforms, they are simply giving these countries a free pass to accumulate new debt. However, this rationale is just as applicable to Greece as to poorer, less developed countries. Opponents of the Greek bail-out and debt restructuring make the exact same argument about Greece, positing that systemic corruption and a lack of political will for change will prevent the country from ever overcoming the crisis, despite external loans and debt relief. Arguably, the deeper issue with debt forgiveness is the willingness of international lenders and creditors to put their own interests at risk in order to rescue another country. If eurozone governments were to allow Greece to go bankrupt, the economic and political cost to the EU and its member states would be astronomical, because of the interconnectedness between the economies of the EU. By contrast, if a poor, less developed country defaults on its external debt, the international community is considerably less affected. In this case, providing debt relief is altruistic rather than self-interested – and therefore more politically difficult to achieve. While this might not be a very uplifting outlook for international relations, it is a revealing statement on the effect of economic interdependency on political cooperation.

1

The Greek Debt Deal: Altruism or Enlightened Self-Interest?

© Rachel Knickmeyer/ Greek Flag / Flickr

 

After much posturing and wrangling, eurozone finance ministers and the International Monetary Fund (IMF) recently came to an agreement on a deal for Greece which will allow the release of the next loan instalment of €43.7bn to the cash-strapped country. Key to the agreement was the passage of Greece’s budget for 2013 and a wide array of spending cuts, tax rises and labour reforms adopted by the Greek Parliament in early November against a backdrop of protests and violent clashes. Harsh as the austerity measures adopted are, they helped convince wary eurozone governments to step in and save the country from bankruptcy.

While a further loan instalment may appear to be nothing more than a band-aid solution to an overwhelming problem, the deal actually goes significantly further than that. Eurozone ministers pledged to lower the interest rate on loans to the Greek government, give Greece more time to pay back interest on the loans it received, and sign over €11bn generated in profits from the purchasing of Greek government bonds by the European Central Bank. All in all, these measures will reduce the Greek debt (around €340bn currently) by approximately €40bn. Even more significant than this indirect debt writedown is the statement that the eurozone commits itself to lowering Greek debt below 110% of GDP by 2022, with the implicit acknowledgement that international lenders may forgive further debt if Greece fails to achieve this goal on its own.

The concept of further debt writedowns is all the more interesting considering that earlier this year, Greece was already granted the questionable honour of the largest government debt restructuring in history as part of its second bail-out by the EU and the IMF. Seen in a broader international context, Greece was already incredibly fortunate to have so much of its debt written off in the first place, and now may be in for more. Other countries are not so lucky: as pointed out by development activists, many poorer, less developed countries suffering from more crippling debt and worse conditions than Greece are excluded from initiatives such as the IMF and World Bank Heavily Indebted Poor Countries (HIPC) debt relief.

So why have international lenders been more benevolent towards Greece than to other countries which are more in need of debt relief? Naturally there are many factors that play into this, including issues such as levels of democracy and corruption in the various countries. Creditors fear that by writing off debt for governments which are unable or unwilling to learn from past mistakes and implement appropriate reforms, they are simply giving these countries a free pass to accumulate new debt. However, this rationale is just as applicable to Greece as to poorer, less developed countries. Opponents of the Greek bail-out and debt restructuring make the exact same argument about Greece, positing that systemic corruption and a lack of political will for change will prevent the country from ever overcoming the crisis, despite external loans and debt relief.

Arguably, the deeper issue with debt forgiveness is the willingness of international lenders and creditors to put their own interests at risk in order to rescue another country. If eurozone governments were to allow Greece to go bankrupt, the economic and political cost to the EU and its member states would be astronomical, because of the interconnectedness between the economies of the EU. By contrast, if a poor, less developed country defaults on its external debt, the international community is considerably less affected. In this case, providing debt relief is altruistic rather than self-interested – and therefore more politically difficult to achieve. While this might not be a very uplifting outlook for international relations, it is a revealing statement on the effect of economic interdependency on political cooperation.

Tags: , , , , , , , , ,


About the Author

Katharina Obermeier

Katharina considers herself a German-Canadian hybrid. She grew up in Germany and completed her BA in International Relations at the University of British Columbia in Vancouver, Canada. Politics, especially in relation to concepts of nationality, have always fascinated her, and she is particularly interested in international political economy. During her studies, she was an avid participant at Model United Nations conferences, and helped welcome international exchange students to her university. She is currently completing an internship at a Brussels-based trade association and hopes to work in European affairs in the future. In her political writing, Katharina marries social democratic principles with a keen interest in the European Union and its implications for European politics and identity. She writes to counteract simplistic ideas about politics and economics, continuously attempting to expose the nuances and complexities involved in these subjects.



  • Your posts tend to always offer great information on whatever the topic may be, thank you for the awesome content!

Back to Top ↑