After months of back-and-forth, European finance ministers approved another bailout package for Greece last week. While most economists agree that this is not a magic wand to resolve all the problems in the flailing country, it does provide a stepping stone move things in the right direction by buying the Greece and the European Union some time to come up with a more permanent solution.
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The plan will provide Greece's creditors with €130 billion while private debt-holders are being asked to enter into a bond-swap arrangement that will have them taking a loss on the face value of that debt but may help stabilize the Greek economy.
The real question, however, is what will Greece do with the time that's been bought. To resolve the debt issue, Greece must implement significant structural changes – including tough austerity measures that many Greek citizens have been protesting for months. As reported in the Wall Street Journal: "Over the next few weeks, Greece's government must complete some 80 new measures to fulfill those demands, including many that must be completed by March 1, said a government official."
And there's still fear that the European Union will slip back into a recession, though the European Commission advises it would be a "mild recession with signs of stabilization."
The G-20 meeting in Mexico City this weekend will likely offer some pointed comments on the ongoing European financial crisis, according to Domenico Lombardi, a senior scholar at the Brookings Institution, as reported in MarketWatch. "The G-20 will use this opportunity to escalate pressure on the European members in terms of erecting a regional firewall around the euro area … No significant decision will be taken, but it will be an opportunity for non-European members of the G-20 to [...] urge the Europeans to fill the still considerable gaps in their own policy response to the crisis,” he said.
The global nature of our economy means many eyes will remain homed in on Europe over the next several months to see if this latest plan will succeed in moving things toward recovery.