Somebody go wake up the kids -- Greece finally hit the pinata. The struggling country appears to have agreed with the European Union on a debt deal that will "save" the country from bankruptcy.
After weeks of being just "hours from a deal," Greece's parliament voted in favor of very stringent austerity measures yesterday that could reduce public wages by as much as 22%. In exchange for strict public spending cuts, Greece will shave $132 billion (about half) of its private sector debt off its books and will receive a $171 billion cash infusion from the EU and International Monetary Fund to keep it out of bankruptcy.
Greece's citizens aren't too happy about the deal -- and with good reason. The country itself was in a no-win situation, facing either bankruptcy or severe budget cuts. In just a two-year period, Greece's unemployment rate has nearly doubled to 20.9% and almost half of Greece's unemployed citizens (47.5%) are currently listed as "long-term unemployed."
Don't get me wrong, I do understand the reasoning behind the stringent budget cuts. If the EU had appeared to come off as soft on Greece, it would offer an easy "out" for Portugal, Ireland, and potentially Spain and Italy if things continued to deteriorate for those debt-riddled economies. In order to present a sheriff-like appeal, the EU had to take a hardline approach to its dealing with Greece and drive home the point to other EU nations that default is not the answer.
The other point that was driven home is that Greece is going to be a mess for a long time. These austerity measures are only bound to make a struggling economy even worse.
Adjusted savings as a percentage of gross national income are at 30-year lows, which bodes poorly for publicly traded National Bank of Greece
This deal might be enough to get European banks BNP Paribas (OTC: BNPQY), Deustche Bank
You know, on second thought, I've changed my mind. Go put the kids back to bed -- there's nothing to see here that materially changes Greece's situation.
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