Greek Drama Is Back On The Table, What’s Next?

Feb 23, 5:30 pm
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For the past few years, Greece was on the edge of collapsing. However, the EU jumped in and managed to rescue the country.

However, the EU managed to bailout Greece many times. Yet, the country is still suffering, affecting the rest of Europe, which in return keeps the uncertainty higher by the days.

What’s The Problem?

The Greek government debt crises are also known at the Greek depression which is caused by the aftermath of the financial crises in 2007-08. But it actually came up to surface by late of 2009 due to the economic recession.

Greece is now in a huge debt which is close to 300 Billion US Dollar of national debt, the economy is in a deep recession, and it is very close to default on its debt.

What’s The Solution?

Well the European Union and the IMF stepped in many times to rescue the country. However, every now and then, the economy slides back, and Greece is basically living in the same circle.

In 2011, the government agreed to the first bailout conditions proposed by the EU, securing a bailout of 130 Billion Euros, which includes 48B euros for bank recapitalization package.

In 2012, another bailout program was announced worth of 240B euro. However, the recession worsened, and the government continued to dither over bailout program implementation.

Another review of the bailout took place in 2014, which reviled unexpected financing gaps, despite the fact that the outlook for the economy improved. Yet, the good news was that the government predicted a structural surplus, which opened the way for an access to the private lending market, which covered the gaps.

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Yet, another recession hit the country in Q4 of 2014, which was considered as a failure of the whole bailout plan, leading to a snap election as the government rejected the existing bailout terms. In return, Troika suspended all the scheduled remaining aid to Greece, and things went out of control again. But the Greek government somehow was able to convince Troika with the revised program. Yet, the economy kept on sliding.

In 2015, after the snap election, Troika granted Greece another four-month technical extension of its bailout program, expecting that the payment terms would be renegotiated. However, facing default, the Greek government decided to announce another proposal, and both were rejected as well, which led to another turmoil in the country, which is a continuous case until today.

What Is The Core Issue?

Despite all the bailout plans and the extensions, Greece slides back into a recession. Why? Because the bailout plan DOES NOT grant enough economic growth in order to repay its debt.

Debt is increasing by the days, earlier this week, the finance ministry reported that the government’s debt load is now 226.36 billion after increasing by 2.65 billion euros in the previous quarter.

What’s Next?

In the meantime, negotiations are ongoing again, and the same story seems to be repeating but with different governments. Moreover, the IMF is also involved which likely to be even harder.

Yet, we have to keep the hopes higher. Grexit is not an option for the EU. Why? Because a failure of one country is a failure for the whole union. This is different than Brexit.

Even if the EU is forced to give Greece an open-ended support, they will do it. Or actually, they will have to do it, as there is no other option.

The extreme scenario here would be for Greece to leave the EU. If this happens then, it’s all about time until the whole union collapses. Therefore, expect a green headline in the coming days about Greece, which likely to lead to a green market.

 
Nour Eldeen Al-Hammoury

Nour Eldeen Al-Hammoury has more than ten years of experience in focusing on foreign exchange and global economic developments, as well as central bank policies and intermarket analysis (global markets relationships). Nour Eldeen is a regular on many major TV networks (several times each) such as: BBC Radio, BBC World News, Al-Jazeera, Al-Hurra TV CNBC Europe, CNBC Asia, CNBC Arabia, Al Arabiya, Bloomberg, Russia Today, Dubai TV, Sama Dubai, Skynews Arabia, Qatar TV and Future TV News.