Aid Junkie

Greece's Inconvenient Truth

  • Why it matters

    Why it matters

    Greece’s ongoing economic and debt problems means the euro-zone country still risks going bankrupt one day, which could jeopardize stability of financial markets in Europe and beyond.

  • Facts

    Facts

    • The IMF, ECB and euro-zone countries have bailed out Greece three times since 2012 to keep it afloat and avert bankruptcy of the euro zone member.
    • Greece’s debt is over 170 percent of its gross domestic product (GDP), a level the International Monetary Fund sees as unsustainable. The IMF favors a debt haircut.
    • Euro-zone countries including Germany oppose reducing Greece’s debt, because these 18 nations hold most of the Mediterranean country’s loans and they fear a debt haircut would set a bad precedent in Europe.
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    Audio

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main DISTORTED 45986198 Reuters – Greece man walks past graffiti Death of euros made by French street artist Goin in Athens May 2015
Greece needs more money. Source: Reuters [M]

No, it was not a breakthrough that the Greek Finance Minister Euclid Tsakalotos and his euro-zone colleagues agreed on last week,  just another step along an arduous path – one unlikely to lead the country out of crisis any time soon. However, the planned return of the “troika” – the tripartite committee of the European Union (EU), the International Monetary Fund (IMF) and the European Central Bank (ECB) supervising Greece’s efforts to overcome its financial crisis – to Athens at the end of April is a sign that an end to the second round of reviews of the Greek adjustment program is in sight.

If the negotiations succeed, Athens can expect payment of further loan installments from the third rescue package created in summer 2015 – just before the Greek finance minister has to raise €8 billion ($8.5 billion) to repay capital and interest due in July. Without a new infusion of capital that will be impossible. It would escape bankruptcy once again.

But last week’s agreement is no reason to breathe more easily, neither for the Greeks nor their creditors. The country’s situation remains precarious; it has not yet been rescued – not by a long way.

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