Greece struggling to solve its economic dispute

Hope fading away for Greek economy as political risks pressuring economic recovery, while negotiations with creditors in crisis

Updated Jul 28, 2015

The clock is ticking for Greek negotiations with the European Union on the release of another 7.2 billion euros bailout funds. The Greek government urgently needs new financing to pay salaries at the end of April and then make a series of debt payments to the International Monetary Fund (IMF) and the European Central Bank (ECB) over the next three months.

As the Greek government is not willing to implement further austerity measures, the country and its creditors have not been able to reach a deal over Greece’s debt payment. The eurozone’s finance ministers, the so-called Eurogroup will meet on April 24 to further discuss the situation.

However, investors are approaching this meeting with scepticism and the focus has already shifted to May 9, the deadline for Greece to repay almost €1 billion to the IMF. This sum is not expected to be raised by Athens.

Meanwhile, Greek Prime Minister Alexis Tsipras ordered local governments on Monday to move their funds to the central bank. The cash from pension funds, counties and public organisations are used to serve IMF liabilities and Treasury bill redemptions.That is a move, which is considered to possibly cause a more painful situation, if the country would end up in default.

Greece’s economy is about to contract again after an increase of 0.6 percent last year, triggered by tourism and private consumption of around 1.5 percent. However, employment seems to be falling again and the primary budget surplus has melted in the last three months.

At the moment, Greek banks are still functioning with the emergency loans from the ECB. But how long this will last is another important question, since it has been claimed that the ECB staff are currently working on a proposal to tighten Greek use of the emergency fund. The proposal consists of increasing the haircut on the security that Greek banks offer in return for emergency liquidity. By increasing this haircut, it would effectively reduce the value of security that Greek banks can offer and consequently the amount of Emergency Liquidity Assistance (ELA) they can draw down. However, it has been reported that the measure had not been formally discussed by the ECB's policy-setting Governing Council while the ECB declined to comment on the subject.

Despite the uncertainty, a majority of Greek voters are still relatively happy with their decision to have chosen Syriza to lead their country. A poll conducted by Public Issue for the Greek daily newspaper Avgi at the beginning of April showed that 82 percent of Greek voters felt that the government's debt negotiations had "restored national pride." In his election campaign, the Greek Prime Minister had promised to set the country free from all the bailout debt burdens and anti-austerity measures applied by the creditors.

On the other hand, a large part of popular opinion is worried about the future. Another poll by MRB on behalf of the private television channel Star, showed that 49.1 percent of Greek voters have serious concerns about the country's future, and another 24.4 percent said they were concerned.

There is also a side of the Greek population that believes that the Syriza government is not taking right political steps and is following basically the same line as former governments.

Although the Greek voters have different opinions regarding their new government, there is one single issue everybody agrees on: Nobody wants to leave the euro. According to a poll conducted in April, 80 percent of Greeks would like to stay in the eurozone.

TRTWorld and agencies