The proposed bailout

Eurozone is at the verge of brokering the world’s largest bailout plan.

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Published: Tue 27 Sep 2011, 8:41 PM

Last updated: Mon 6 Apr 2015, 7:03 PM

If reports from the International Monetary Fund are to be believed, the continent and especially Greece has a reason to smile as the coordinated efforts of member countries with the biggest donor is likely to see a massive liquidity injection — enough to keep the stagnant economies afloat. But what make this intervention more important is the fact that it attempts to address the core of the dispute at hand, i.e., the sovereign debt and the inability of the member countries to meet their budgetary targets in an era of pestering recession.

The suggestions are quite startling. The proposed 50 per cent write-down of Greece debt could definitely be the way to go ahead, but that could come back to trigger a snowball reaction wherein many other countries on the brink would hope for such a remedy in their case as well. If that becomes the modus operandi then it would be really difficult to strike an equation in world economy. Such a module was, in fact, proposed for the debt-ridden and growth-less African continent, but couldn’t materialise for obvious lack of geopolitical interest. Nonetheless, it remains to be seen what conditionalities are there in the bailout plan for Athens and how come a government that has been squarely struggling to strike an equation between austerity measures and spending can cater to the wish-list of the IMF.

The most promising development, however, is once again the stress on creating a bailout fund to the tune of a staggering two trillion euros that could act as a cushion in times of adversity. But that too seems to be just another shot in the dark as British finance minister is on record, saying in Portugal, where the G-20 met last week, that no such plan is in the wings. The only thing that could come to obstruct the ambitious EU-IMF restructuring agenda is the vote of dissent from either of the member state, foreseeing a negative impact on their domestic economy by virtue of cobbling behind the bailout decorum.

The onus is on the IMF to tailor-cut its cloth in such a way as it comes as a rescue and blessing in disguise, rather than as a stunt. The equation is evenly poised as of now.

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