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Monday, January 25, 2016

Greece Will Need Another Bailout

Unsurprisingly Greece, it seems, isn't fixed!

Klaus Regling, the Managing Director of the European Stability Mechanism, has said that he believes that the Greek government will soon be out of liquidity and Greece will need another midterm program with the participation of International Monetary Fund (ie another bailout).

He is quoted by Keep talking Greece:
Greece will not need money tomorrow, but sooner or later there will be a money problem. 

Greece has debt service payments of nearly 4 billion euro in the first quarter [of 2016]. It is very likely that the country has a small primary deficit in the beginning of the year. Therefore, the government will need money to cover budget spending.
That will not go down well in Germany.

Regarding Greek Debt Relief, it is bad news for the Greeks. Regling said that the Eurogroup was committed to Debt Relief after the Program Review is completed.
Economically, the renegotiation of debt is not urgent because Greece has received a grace period of 10 years to repay the debt and the majority of the interest. Therefore, during the next 10 years, the service of the debt will not be increased.  

Consequently, a new debt relief would have an impact on payments, mainly after 2022.”
That will not go down well in Greece!

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