Greece may still head towards Grexit

Greece presents parliament with draft legislation outlining second batch of measures, upon eligibility mass bailout package will be determined

Photo by: Reuters
Photo by: Reuters

Updated Jul 28, 2015

Although the Greek government presented its parliament with a draft legislation on Tuesday, the debt strapped country has till Wednesday to take austerity measures to pass through parliament to begin talks on a €86 billion rescue package. Nevertheless, analysts say chance of a ‘Grexit’ is still high.

During a debate on reforms, Greek Finance Minister Euclid Tsakalotos noted that “it’s a hard deal, a deal for which only time will show if it is economically viable.”

Athens may successfully pass policies through its parliament and may implement all measures demanded by its international creditors but, if its fragile economy fails to fulfil debt targets, Greece may once again opt for an exit, or worse be forced out of the eurozone by its international lenders.

According to a Bloomberg survey of 34 economists, 71 percent of respondents believe that Greece will forced out of the eurozone by the end of 2016.

If Greece was to exit the euro and return to its previous currency, the drachma, it would need to cover the cost of all its imports with the foreign exchange earning on their exports as it currently has no foreign exchange reserve.

In order to ease tensions and rebuild trust with the country’s foreign creditors, Prime Minister Alexis Tsipras assured that more austerity measures will be added if there is no significant change in the country’s position.

The second bill presented to lawmakers contain amendments to the Greek law where new European Union rules will be applied to boost banks which had crumbled during the 2008 financial crisis. The main aim is it protect taxpayers from the risk of having to bail out troubled lenders.

The European Central Bank (ECB) also showed optimism over the bill which includes civil justice reforms designed to accelerate proceedings and reduce their costs.

“The ECB welcomes the draft law, as it strengthens the tools and procedures available to the Bank of Greece to carry out effective preventive, early intervention and effective resolution measures,” stated the ECB.

When the first bill of unpopular reforms made it through the parliament last Wednesday, 32 of the 149 MPs of the Syriza party voted against the measures, while six others refrained from voting.

The Greek public objected to the measures with mass demonstrations however, officials believe the second bill will not spark another mass protests as such.

If the public continues to protest against Tsipras' coalition government a snap election could be held later in the year.

Meanwhile, the President of The National Confederation of Greek Commerce, Vasilis Korkidis announced that close to 60,000 Greek companies have submitted applications to relocate to Bulgaria, according to an article published in the New Europe Investor.

It was reported that the relocation demand rose during June 28 when capital controls were first enforced upon Greece. Since then, the Greek government has been struggling to keep up with the negative backlash of capital control.

Currently there is close 11,000 to 14,000 Greek companies registered in Bulgaria, the article noted.

TRTWorld and agencies