Home Tags Posts tagged with "greek economy"

greek economy


Greek Finance Minister Yannis Stournaras has said the country may need a third bailout but would not accept new austerity measures.

Yannis Stournaras said: “If there is need for further support to Greece, it will be in the order of about 10 billion euros [$13.4 billion], or much smaller than the previous programmes.”

Greece has already received two bailouts totalling about 240 billion euros.

Meanwhile, Cerman Chancellor Angela Merkel has warned about writing down any more Greek debt.

She said a so-called haircut of Greek debt would be bad for the stability of the eurozone, which has seen a return in investor confidence after years of worrying about the future of the single currency following bailouts of several nations – most recently, Cyprus.

“I am expressly warning against a haircut,” Angela Merkel said.

Greek Finance Minister Yannis Stournaras has said the country may need a third bailout but would not accept new austerity measures

Greek Finance Minister Yannis Stournaras has said the country may need a third bailout but would not accept new austerity measures

“It could trigger a domino effect of uncertainty with the result that the readiness of private investors to invest in the eurozone again falls to nothing.”

Angela Merkel’s comments come after Germany’s finance minister, Wolfgang Schaeuble, said – for the first time – earlier this month that Greece will need another bailout to plug a forthcoming funding gap.

The issue of bailouts is a sensitive one in Germany, where Angela Merkel faces elections for a third term on September 22.

Many Germans feel they have already contributed enough to European bailouts.

The International Monetary Fund (IMF) last month estimated Greece would need around 11 billion euros in 2014-15.

On Sunday, Yannis Stournaras told Greek newspaper Proto Thema that any further bailout would be smaller than the previous two.

But he also warned that Greece would not accept any more forced spending cuts from its partners.

“We are not talking about a new bailout but an economic support package without new [austerity] terms… until 2016, the targets – our obligations – have been set and other measures or targets cannot be required.”

The Greek economy has shrunk further than any other in Europe, with bailout money only released on condition that the government imposes cuts and implements restructuring.

It comes after most of the 18-member eurozone countries came out of recession earlier this year.

Greece’s troika of lenders – the European Commission, the European Central Bank and the IMF – will review the aid programme in the autumn.

[youtube JUVrsbfoOEU]

Latest official figures show that unemployment in Greece hit a record 25.1% in July, with the level among young people reaching 54.2%.

Greece’s statistical authority said 1.26 million Greeks were jobless in July, with more than 1,000 jobs lost every day over the past year.

With austerity cuts continuing and Greece likely to enter another year of recession, the level may rise further.

The worst-affected 15-24 age group, however, includes those in education.

According to Greece’s statistics agency the total unemployment rate rose from 24.8% in June. In July 2008, a year before Greece’s financial crisis broke, there were about 364,000 registered unemployed.

“This is a very dramatic result of the recession,” said Angelos Tsakanikas, head of research at Greece’s IOBE economic research foundation. He did not expect employment to pick up for at least a year.

The Greek economy is surviving on international bailouts, but Athens has been forced to impose tough austerity measures in return for the money.

Finance Minister Yiannis Stournaras will hold talks on Thursday evening with representatives of the European Union, International Monetary Fund and European Central Bank about signing off the release of more funds.

There was some evidence on Thursday that the government’s strategy is working on one front, at least. Finance Ministry figures showed that the deficit-cutting effort is on track despite lower-than-anticipated revenues.

The ministry figures showed that the January-September deficit was 12.64 billion euros, lower than the 13.5 billion-euro target.

 

Cyprus has told the European authorities that it intends to apply for financial assistance.

Cyprus is the fifth eurozone member to do so.

It said it needs help to shore up its banks, which are heavily exposed to the Greek economy.

The announcement came on another day of nervousness about the single currency.

Shares in Italy, Spain and Greece fell sharply amid concerns that an EU summit this week will again fail to produce a deal to shore up the euro.

The Spanish prime minister called for Thursday’s European Union summit to “dispel doubts” about the euro.

The Italian and Spanish indexes both closed about 4% down. The fall on Spain’s Ibex index was exacerbated by a Reuters report that the Moody’s credit rating agency is planning to downgrade Spain’s banks.

Earlier, Spain formally requested a bailout loan for its banking sector, expected to be for up to 100 billion Euros ($125 billion).

The country needs to find about 1.8 billion Euros over the next few days to recapitalize its second largest lender, Cyprus Popular Bank.

Cyprus has told the European authorities that it intends to apply for financial assistance

Cyprus has told the European authorities that it intends to apply for financial assistance

In a short statement, the government said that it required assistance following “negative spillover effects through its financial sector, due to its large exposure in the Greek economy”.

A government spokesman, Stefanos Stefanou, said the amount of European aid would be subject to negotiations in the coming days.

He said that despite the request, the Cypriot government would continue negotiations for a possible loan from a country outside the EU, such as Russia or China.

The country has already borrowed 2.5 billion Euros from Russia, whose business people are important customers of Cyprus’s relatively large offshore financial sector which offers low tax rates.

Its banks have lost large amounts on Greek government bonds. They are also facing big losses on loans made to businesses in Cyprus, which have been hard hit by the deep recession in neighboring Greece, its biggest trading partner.

Credit ratings agency Fitch said the country, which has a population of one million, would need 4 billion Euros to support its banks, the equivalent of almost a quarter of its GDP, or economic output, last year.

Earlier, it cut the Cypriot government’s credit rating to junk status, making it even harder for the country to raise the funds itself.

Fears are building that this week’s two-day European Union summit could prove inconclusive.

“We must dispel doubts over the eurozone,” said Spain’s prime minister Mariano Rajoy.

“The single currency is, must be, irreversible,” he said.

In another indication of the conflicts between European nations on the best way forward, Angela Merkel reiterated her opposition to calls to pool eurozone debt, which would make it cheaper for eurozone economies to borrow.

“There has to be a balance between guarantees and controls,” she said.

IG Index analyst Chris Beauchamp blamed Chancellor Merkel’s reluctance to share liability for eurozone debts for the share price falls.

“This was, is and will remain the fundamental issue in the crisis – Germany is understandably not keen on taking on the burden of debts built up by (as it sees it) spendthrift countries,” he said.

The problems facing Europe’s banks will be on the agenda at the summit of European leaders on 28 and 29 June.

Draft documents prepared for the meeting, which have been reported by news agencies, detail proposals for a single European banking supervisor and a common scheme for guaranteeing bank deposits.

There would also be a central fund to wind down bad banks.

Options for the regulator include having one body, possibly the European Central Bank, to oversee the continent’s biggest banks, while another watchdog supervises the day-to-day operations of all the banks.

The proposals also include closer fiscal union, with the prospect of eurozone countries sharing debt raised again.