Troika arrives in Greece amid speculation over exit
EUROPEAN debt inspectors arrive in Greece today to assess the country's progress in meeting official bail-out targets, amid fresh speculation over the country’s future in the eurozone.
Officials from the so-called "troika" of the European Central Bank (ECB), European Commission and International Monetary Fund (IMF) will determine whether Greece will receive fresh loans of €31.5bn by September under a €130bn bail-out agreed last year.
Without this money, the Greek government will be unable pay pensions or salaries, or meet its debt commitments.
The IMF was forced on Monday to issue a comment on Greece, as market tension mounted following reports that it was close to refusing any additional financial support for the beleaguered country.
“The IMF is supporting Greece in overcoming its economic difficulties. An IMF mission will start discussions with the country's authorities on July 24 on how to bring Greece’s economic programme, which is supported by IMF financial assistance, back on track,” a spokesperson for the IMF said.
It appears likely that Greece will try to ease the terms of its rescue package, in particular extending the reduction of its deficit to 3pc by two years to 2016.
Economists at the Centre for Economics and Business Research warned the eurozone crisis could escalate in August, with rising expectations of an imminent Greek exit.
“Euro crises have a tendency to emerge in August. Many European decision makers go away on holiday, financial markets are thin meaning that any perturbation is exaggerated,” said Douglas McWilliams, chief executive of the think-tank.
“In addition, there is a view that the European financial authorities are only waiting until the long-term funding mechanism, the European Stability Mechanism, is ratified in September before cutting Greece out of the eurozone. If this view takes hold, the markets will anticipate it and there will be further runs on Greek banks, in which case it will become a self-fulfilling prophecy,” he added.
CEBR said Greece’s trade and tourism data suggested the country was likely to be a “disaster zone” this year, with arrivals at Greek airports down 4.6pc in the first six months of the year.
Antonis Samaras, the Greek Prime Minister, told former US President Bill Clinton that Greece was in the midst of a “Great Depression” similar to the one experienced in America in the 1930s.
Policymakers face a tough task to reach an agreement on what Greece must do to receive future bail-out loans that is deemed acceptable to all parties. For now, then, we still think that Greece could exit the single currency by the end of the year,” said Ben May of Capital Economics.