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Victoria Mindova 

Rescheduling of the Greek foreign debt in its present form is not only imperative, but also inevitable. Moreover, this process was delayed by one year. This is how the economist Jens Bastian answered GRReporter’s question whether the voluntary participation of private lendors in rescheduling the payments on the Greek government bonds in recovering the local economy is imperative. Jens Bastian studies in detail the economies of the countries of South Europe and is a lecturer at St. Antony's College, Oxford. The problem is that most European financial institutions and banks got rid of Greek government bonds accumulated in previous years and the process could be ineffective.

According to the economist, valuable time was lost to take such an action and today, we could say that it is too late for such an action. Ha also stressed that the debate in Germany is almost baseless, because local banks no longer avail significant amounts in Greek government bonds. They sold them to the European Central Bank or to international hedge funds, which absorb the value of toxic bonds in the total package of their assets. As to whether voluntary rescheduling would cause a credit event and the markets would interpret it as a controlled bankruptcy, Jens Bastian said that credit rating agencies make this decision and it does not depend on the political position of the European leaders. In other words, the fate of the country is in the hands of the agencies, whether European politicians and analysts agree with it.

The debates about the participation of private holders of Greek government bonds are serious and turned out to be the apple of discord between the political departments of the major European countries and the European Central Bank. The German Chancellor Angela Merkel was the first to support the idea of private lendors to take part in the rescue of Greece, not just the European countries and their taxpayers. Other member countries approved this proposal, although the financial aid is not free, but in the form of a loan with a preferential interest rate. The main opponent of the idea remains the chairman of the European Central Bank Jean-Claude Trichet, who believes that this process would prove disastrous for Greece and later for the whole euro area. However, there will be rescheduling regardless of the consequences, because Greece is not able to handle in parallel the deficit reduction, the measures it requires and the management of the debt crisis.

Capital markets are aware of the difficulties faced by the country's recovery process and the apparent inability of the Greek government to implement the necessary structural reforms to reduce public spending. This affects the price of free markets lending to Greece, which remains too high. The spread of Greek government bonds remained above 1370 bps, while the CDS reached a dramatic new record of 2200 bps. Financial analysts at Markit estimate that the probability of Greece’s failure is 84% ​​and the trends for the near future remain bleak.

The Greek economic crisis and ensuing problems in the periphery of the euro zone and Ireland led to the need to reform the European Union. They necessitated the formation of new structures and regulatory frameworks that would bring together the countries and would coordinate more closely the differences in the functioning of the units in the general whole so that the imposed policies are enforceable in all EU countries. A group of German economists, political scientists and historians prepared the report Making the European Union work – Issues for Economic Governance Reform, which was presented in Athens at the invitation of the Hellenic Foundation for European and Foreign Policy.

The European Union has reached a turning point, said Jens Bastian, who is a member of the team behind the report. In his opinion, the beginning of the debt crisis has unleashed a series of structural reforms, both at national and European level, which were inconceivable until two years ago. A discussion is already running on issues such as constitutional debt brake, pension systems monitoring as well as on the permanent rescue mechanism. Topics that have not existed until recently, but today are crucial for the survival of the euro area and the EU.
  
The European structures have shown in recent years that they need improvement. Iain Begg, Professor at the London School of Economics and a member of the team said that one of the most serious issues today is around the "F" word and it is a fiscal union. He believes that the success of the single currency lies in aligning the regulatory framework in all countries at a much deeper level. European leaders have to adopt unanimously a single tax, pension and social policy that they would strictly observe. He said jokingly that if this had happened 20 years ago, Greece should not experience these problems today.

He said that what has remained unfinished in the European Union concerns the relationship between macroeconomic stability and financial stability, or between borrowing from the financial markets and the macroeconomic policies in member states. Another important step that EU countries should take is to issue Eurobonds to stimulate the economies of member states. Currently, the Germans, Dutch and Scandinavians do not approve the idea of ​​Eurobonds, because this would increase the price of their lending in the short term, but in the long term the euro area would not survive without additional funds from the Eurobonds and the price of inaction would be much higher.

The hardest part, according to Iain Begg, is to introduce a European tax. The member states are benefiting from EU subsidies. The money in the European budget is intended for the development of social policy and improvements in the health care system and social innovation, or for strategic projects such as infrastructure. The dark truth is that there is no such thing as a European taxpayer in the union. Tax is paid at the national level and this should change.