Home > Euro > Greece’s problem is insolvency not liquidity shortfall.

Greece’s problem is insolvency not liquidity shortfall.

This is an interesting video clip from the RT Network featuring Max Keiser. Everyone knows Greece is insolvent but no-one has ever stated it officially. Some have suggested that the issue is a liquidity shortfall and lending it more money will help Greece meet its current debt service obligations and fund structural reforms that will lead to renewed growth and increased income, enabling to meet its obligations in the future. However Yanis Varoufakis, current Finance Minister of Greece, disagrese with this interpretation. He believes that Greece will never recover. The bailout programme locks it into a debt deflationary spiral which simultaneously reduces its income and increases its debt burden. Continuing to accept more loans in order to meet debt service obligations only makes matters worse.

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