Posted by on March 7, 2017 9:51 pm
Tags: , , , , , , , , , , , , , , , , , ,
Categories: Alexis Tsipras Austerity bailout Creditors default Economic history of Greece Economy European Central Bank European Commission European Union Eurozone crisis Financial crises Greece Greek government Greek government formation, January Greek government-debt crisis International Monetary Fund recovery Sixth austerity package

The Greek debt crisis has been around for a long time, probably raising its head just around the time that the U.S housing and loan crisis unfolded in 2009; when the country acknowledged that it piled up debt to the tune of 113% of its GDP

Since then, through endless turmoil and stress, the country has been battling with its creditors to “give it a break” and write-off a large chunk of its owing. That story still continues till this day!

A RAY OF HOPE?

A review of Greece’s financial performance in mid February, by the European Commission (EC), shone a ray of hope on the battered nation’s economy. The Commission had earlier predicted that the country’s GDP would see a decline of 0.3% in 2016. That forecast was revised upward – noting a growth (instead of a decrease) of 0.3%.

The review also concluded that there was hope of a continued recovery through 2017 with a 2.7% increase, and a 3.1% GDP rise in 2018. However, this was predicated with a very important proviso: That the soon to be held review (planned for February 20th) of Greece’s dept relief package concludes quickly; and that Greece may need to embrace additional austerity measures as a result.

And that sent dark clouds to cover the tiny ray of hope!

Greek prime minister’s leftist coalition government was quick to dismiss any suggestions of yet more austerity measures. Hardliners within the coalition believe that the Hellenic nation is being asked to tighten its belt more than what was previously agreed – without anything substantial to show in return.

Digital Policy Minister Nikos Pappas minced no words in telling his supporters what he thought of the ECs comments: In Pappas’ words, there would be “…no more {austerity} measures” accepted by the Greek government. Period. 

The dark clouds overshadowing the ray of hope just got even darker!

THE RACE IS ON

With the next installment (of €86B) of bailout funds hanging in the balance, Greece is desperate to find a resolution to its predicament – as are its creditors. In July this year, the Greeks have to make €7B in debt repayments to the European Central Bank (ECB). As a result of the latest crisis, there’s renewed talk of a Greek default, which has sent interest rates for Greek debt rising, while badly hitting the country’s already struggling stock market.

Meanwhile, in an effort to resolve the deadlock, EU Finance Commissioner Pierre Moscovici met with Mr. Tsipras in Athens on February 15th.  The urgent session really had just one agenda item: To try and convince the Greeks that further austerity measures would be the only way that the next tranche of bailout funds, amounting to around €86B, would be released.

THE REAL “STORY”?

Despite all the wrangling and raucous flurry of activity – both behind and on the scenes – Greece-watchers might be wondering what the “real story” here is. A central party to the Greek bailout talks, the International Monetary Fund (IMF), seems to be sending out mixed signals. 

At a recent press event, its Managing Director, Christine Lagarde, said that the IMF “…cannot cut a sweet deal for a particular country”; meaning Greece should not expect “special treatment” from the world’s lender. Simultaneously though, she indicated that Greece’s creditors should brace themselves for a “haircut” as a means to resolve the latest standoff.

So, what’s the real story here? And who will blink first? Will it be the lenders throwing in the towel, or will Greece have to bow to international pressure – again! – and swallow yet another bitter pill of unpopular economic belt-tightening? Time will tell!

Leave a Reply

Your email address will not be published. Required fields are marked *