The interest rate on quarterly government bonds is growing inexorably. This became evident after Greece has again hit the market with short-term securities to fill the gaps in operating costs. The Public Debt Management Agency stated it has collected 3.13 billion euro at an interest rate of 4.48%. The interest rate on the same type of securities was 4.28% a month ago and the demand was covered 2.12 times. At the August auction, the percentage of covered demand was just 1.36%. The Ministry of Finance has announced that it will accept non-competitive bids amounting to 30% of traded amount to 12 pm on 16 August this year. The total accumulated amount will reach 4.3 billion euro and it should cover the repayment of the bond issue, which is due on 20 August this year. In other words, Greece continues to pay some obligations by creating others of a much higher rate and shorter maturity.
At the same time, 20% of the loans in Greek banks are in the red and not served, Kathimerini reports. These are about 48 billion euro that have been granted in consumer and business loans and credit cards. The government has updated its expectations for the recession. According to the National Statistics Institute, Greece's economy shrank by 6.5% of GDP in the second quarter of 2012 and it is not excluded that the recession may hit 7% by the end of the year. Unpaid loans jump by 1% every month. People familiar with the processes in the Greek banking sector stressed that if the government failed to take immediate and decisive steps to restore the economy, the financial system would need additional help beyond those present 50 billion euro.
Greek economists who traditionally support different theories about how the country should emerge from the crisis now agree that the only way out of the vicious circle of recession is a new debt haircut, but this time to institutional lenders.
Economist Yiannis Varoufakis, who is largely supported by SYRIZA, told Antenna that the Troika itself should reorganize the Memorandum. It should reduce the obligations of Greece to the European countries and the International Monetary Fund and establish a temporary moratorium on foreign debt payments until Greece puts its domestic economy under control. According to Varoufakis, Greece’s future depends entirely on the political attitudes that prevail in Germany. The economist forecasted that if the Greek foreign debt were not haircut, Brussels would possibly "sacrifice" Greece in order to persuade German and French taxpayers to accept the rescue of Italy and Spain more easily.
Dimitris Hionis, an economist who supports ideas that are more conservative, also believes that a restructuring of the Greek foreign debt held by European countries is about to take place. However, he is sceptical about Greece’s exit from the euro area because this would cost the strong countries in the single currency more than the partial debt haircut. Hionis cited data from Economist magazine, according to which GREXIT would cost Germany about 350 billion euro. "As you can understand, this is a significant amount that no one could afford, even Germany," he explained to Antenna. "European citizens should decide on the OSI (Official Sector Involvement), which is similar to the 53% haircut of outstanding loans to the private sector PSI + (Private Sector Involvement). This is extremely difficult to achieve, but Greece will not be able to move forward unless it happens." Hionis was clear that the exit of Greece from the euro area would not give Germany the desired comfort. After it, the membership of both Portugal and Spain and even Italy will be under question, which in itself will lead to the disintegration of the union of the single currency.