Greece in focus again but usual panic has eased
Published 13/11/2012 | 05:00
GREECE has once again become a focus of attention in Europe this week but there is none of the panic witnessed at other summits in recent years.
There are several reasons for this. One reason was the Greek parliament's decision on Sunday night to pass an austerity budget worthy of the name.
As our graphic shows, Greeks inside the cosseted public sector now face real wages cuts and will also have to work longer.
With a new retirement age of 67, the Greeks join the Irish and a handful of other European nations with the dubious distinction of having the latest retirement age in Europe.
Public sector workers who have already retired will see their pensions cut by as much as 15pc while those unfortunate enough to lose their jobs will get 35pc less and will now get just four months' notice before their redundancy comes into effect.
The Greek economy continues to contract at an alarming rate but it is not all bad news. The government said yesterday that it beat its deficit target for the first 10 months of 2012, narrowing the gap to €12.3bn from €21.1bn in the same period last year. This means that Greece has a deficit not far from our own despite having a much larger economy.
While there is the odd reason to hope, which explains the leisurely pace of the talks in Brussels yesterday and today, there are few reasons to be cheerful. Greece remains on track to become the poorest country inside the European Union within a few years.
European officials have also given up on the last timetable for a return to debt sustainability. Officials now seem to be suggesting that a decade is now the minimum time needed for making Greece's debt "sustainable", suggesting an extension to existing timetables to 2022 or 2023.
The extra time would allow the economy to start growing again, otherwise it would never produce enough for the country to repay its debt.
The EU and IMF's latest report into the Greek economy was delayed this week because officials can't agree on the section on debt analysis which looks at how to reduce Greece's debts from a forecast 190pc next year to around 120pc by 2020 – a level the IMF has deemed sustainable in the long-run. It remains unclear when the analysis will be finalised.
It is only when the troika agrees on the debt analysis that it will be sent to national parliaments to get approval for the disbursement of the next aid tranche – money Athens needs to pay off loans and shore up its banks.
One thing the lenders do agree on now is that Greece, which will see its sixth year of deep recession in 2013, needs at least two more years to reach a primary budget surplus that would put its debt on a downward path.
This surplus target was set in March at 4.5pc of GDP in 2014 and while there is no final decision yet, officials say it is likely to be moved to 2016 because of delays with reforms and a deeper-than-expected recession. All this means that it is extremely unlikely that agreement will be reached in Brussels today. While there will be no grand agreement, European finance ministers are expected to find a temporary solution to the problem because Athens has to redeem €5bn worth of treasury bills on Friday and had been counting on cash from the next eurozone aid tranche to help cover that.
While patchwork solutions will never be enough, the world's indifference to Greece these days despite the many problems suggests that more and more investors have decided that a solution of sorts will eventually be found despite the dizzying array of problems that Greece still faces.