10th April 2015

Doubts over Greek future persist

Greece has been in discussions with its creditors for weeks now, but the conclusion of the talks is still quite far away. Prime minister Alexis Tsipras´s SYRIZA party won the elections in January with promises to end austerity and restore Greek sovereignty. The eurozone finance ministers and the ECB made it clear that under such circumstances the Greek bailout program would end, immediately bringing about Greek sovereign default and possibly also exit from the euro. Cornered by its lenders, the Greek government made a provisional deal to extend the existing program by 4 months, beyond the original February 2015 end date. But the trust was on such a low point between Greece and the lending institutions, that they made it very clear that unless a firm commitment to certain reforms were demonstrated, Greece would not get the last outstanding tranche of the bailout, some €7.2 billion. Also, the ECB cut funding for Greek banks, leaving only a more expensive possibility for them to borrow from the Greek central bank. With repayment dates on several bond emissions drawing near, the Greek government needs to agree on the reforms with the creditors as soon as possible. At the same time, the Greek banking sector is still merely surviving on the emergency line provided by the Greek central bank, since the Greeks massively withdraw money fearing exit from the euro and successive devaluation of the new currency.

Several lists of Greek reform have already been presented to the lending institutions. However, none was considered comprehensive and trustworthy enough. The most recent list was presented in the beginning of April, but even that one was described as too vague and unrealistic. Greece got six work days to rewrite it. The time for a final deal is short. On 24 April at the latest, the Eurogroup must approve the final list – the self-imposed deadline is the end of April. When and only when the list is approved, may Greece obtain the last tranche of the bailout. It badly needs it. Last week, Greece paid some €450 million to the IMF, right on time as previously planned. But it has been reported that Athens is short of cash. It is expected that without a deal, it can run out of money on 20 April. Several big repayments (counted in billions of euros) are due in the coming weeks and Greece also needs money for its normal functioning. Not to mention the sorry state of its banking system. There were some indications that if Greece were to be short of money, it would first pay its pensioners and civil servants, not the international creditors. However, the finance minister Yanis Varoufakis re-confirmed the commitment of Greece to pay all of its obligations. It is important not to forget, though, that even if the present bailout program is concluded and Greece pays all of its obligations on time, it will still needs a third program starting in the summer. Its economy is still weak and yields of its new sovereign bonds would still be unrealistically high.

Mr Tsipras visited Moscow last week and some analysts predicted overtures by President Vladimir Putin towards Greece. Russia could for example offer some bailout money to Greece, without the tough conditions imposed by the EU institutions. This seems not to be the case, although Mr Tsipras reconfirmed that Greece considers the EU sanctions against Russia unnecessary and therefore problems may be expected in early summer when the current measures expire. Also, there were some indications about possible extended energy cooperation and lifting of import bans from the Russian part. But Greek future is in Brussels, not in Moscow, as many insiders and analysts point out repeatedly.

For more, click here, here, here and here.

Members of the American Chamber of Commerce in the Czech Republic