No, it is not the latest Greek hairstyle emanating from Athens. This term refers to the amount of downgrades or cuts in Greek debt that debtor banks and others have agreed to accept or may accept to ease the Greek financial crisis and hopefully to prevent or ease other financial problems for beleaguered Europeans. Union .
The haircut
A deal reached in late October 2011 called for a 50 percent cut, meaning that banks would expect only half of what they had been promised in terms of interest on outstanding Greek debt. Some called for an even bigger haircut of sixty percent or more, insisting that Greece would need at least as much relief to make the debt manageable and maintain its citizen content.
Negotiations for the Greek haircut were conducted by members of the Troika, the trio of groups made up of the European Commission (EC), the International Monetary Fund (IMF) and the European Central Bank (ECB).
In 2011, Prime Minister George Papandreou announced that the recently agreed deal would be subject to a referendum vote, which could put the deal and his “haircut” at risk; many Greeks did not believe that the agreement was good for Greece, although it was considered essential for Greece to remain a member of the European Union based on the euro. This announcement was later rescinded in the face of global panic over Greece rejecting the terms and leading to the collapse of the Papandreou government.
In 2012, a new Greek haircut returned to the table under Greece’s new coalition government that took power in June 2012. From then on, many observers believed that a further reduction in Greece’s debt was imminent. , but it was avoided.
In 2013, financial problems in the banking system in Cyprus also led to talk of a “cut” of the Cypriot debt. And in late 2013, as Greece struggled with the Troika’s new requirements, a “haircut” for Greek debt emerged again.
Examples
Although the parties involved agreed to a fifty percent cut in Greek debt, the Greeks may not approve of it, as they will have a chance to vote on the deal in an upcoming referendum.
The depositor’s ‘haircut’ would be a function of the ELA staggered cut that the ECB could impose to intensify the rhetoric between the two sides, and could occur with as little as a 10% increase in the collateral haircut of ELA from its current 50% level «( Financial Times, » Greek banks considering a 30% cut in deposits over € 8,000 «, July 3, 2015).
«German Chancellor Angela Merkel, once again, intervened in Greece’s bailout crisis by refusing to endorse a ‘haircut’ for Greece – debt relief, or cancellation of part of its debts – despite the fact that Germany received a generous haircut in the years after World War II “( Sputnik International , April 4, 2016).
