Does Greece Need Another Bailout?
Greece has been on the verge of total bankruptcy for the past couple of years and there are no signs that the country will dig itself out of its hole anytime soon. The glimpses of hope that came after its parliamentary elections have, since been overshadowed by the harsh economic reality nothing much has changed. At the moment, Greece is effectively on life support and the only thing allowing the country to pay bills, salaries and pensions is the money that the IMF and the fellow Eurozone nations have been pouring into it since 2010. €240 billion of rescue money has already been committed through two bailout packages. Last year’s loan agreement for €130 billion was supposed to keep Greece afloat until 2014. And the Greeks may need another bailout package soon, The Times reported on September 14.
The subject was raised by the country’s representative on the International Monetary Fund, Thanos Catsambas, who yesterday spoke to The Wall Street Journal. Mr. Catsambas said: “Greece will require additional financing, which may take the form either of official-sector involvement or of additional loans, hopefully on more favourable terms”. He also revealed that last year the previous Government managed to complete only 22 percent of the commitments it made after the previous bailouts.
!m(/uploads/story/378/thumbs/pic1_inline.png)The Greek Government denied the claims with haste, but the country’s capability of handling the current economic situation on its own is questionable. Greece is facing a number of serious problems, with unemployment skyrocketing in the second quarter of the year and a new general strike on the horizon.
Nearly a quarter of Greece’s population is currently unemployed, a significant increase on last year’s 16.3 percent. Meanwhile the country’s largest unions have called for a general strike on September 26, to protest against the new austerity measures.
Greece’s Prime Minister Antonis Samaras has asked the Eurozone to give the country a two-year extension on meeting deficit reduction targets. However, this is likely to create an extra €20 billion funding gap. A gap that, Mr. Catsambas said, is very unlikely to be possible to fill by Greece’s efforts alone.
The grim picture outlined by Catsambas, suggests that another big contribution from the Eurozone will need to be made soon, to allow Greece to function and prevent the abdication from the Eurozone that has been fought for so long. That money would most probably have to come from taxpayers across the Eurozone and that means more ammunition for the opposition to the Greek bailouts, which is widespread across the 17-country bloc. Dutch Prime Minister, Mark Rutte won the general elections in the country, with the slogan of his campaign clearly stating disapproval of the aid for Greece. Similar attitudes can be increasingly seen in other Eurozone nations and as the opposition voice gets louder, it will become increasingly more difficult for Greece to get additional rounds of funding.
The news about a potential third bailout package had a negative effect on the euro, which started falling against the US dollar, dismissing what, up to this moment, has been a rather positive week for the currency.
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