Greece on the brink again

The provisional agreement for Greece's bailout is in danger of unravelling.

733-Greece-634

Yanis Varoufakis: little left in the kitty

Two issues occupied the markets this week. One was the strength of the US economy, which unsettled equity markets as it boosted the dollar and made a June interest-rate hike by the US Federal Reserve more likely. The other, as so often, was Greece.

While another round of talks between Greece and its European creditors began mid-week, there were fears that the provisional agreement made last month, whereby Greece's bailout would be extended for four months in return for a series of reforms, could unravel.

In the run-up to talks, one European finance minister unimpressed with Greek efforts to flesh out the reform proposals Greece produced last month said they should "stop wasting time". In response, the Greek government raised the prospect of a referendum or another election if its creditors proved unwilling to yield to its demands to renegotiate its debts.

What the commentators said

Yanis Varoufakis, the finance minister, has said that there is cash for salaries and pensions of public employees, but there seems to be little else in the kitty. Austria's Der Standard noted that further deposit flight in the past few days has meant that Greek banks can no longer finance some companies' day-to-day activities, such as importing goods. It may not be long before gaps start appearing on supermarket shelves.

Alexis Tsipras, the head of Greece's populist, anti-reform and anti-austerity Greek government, is "in a bind", said Hugo Dixon on breakingviews.com. He has found last month's deal "difficult to sell to hardliners" in his party, as they accuse him of abandoning many of his election pledges. He is likely to have to abandon pretty much all of them if he is to secure the deal.

Yet the turbulence resulting from a default and euro exit could cause another depression. Hence investors should "expect another fudge", said Nils Pratley in The Guardian. Greece may secure "a few minor tweaks" to the reform programme and "the charade that all is well with Greek debt", which of course is impossible to repay, will be maintained.

Recommended

How the Covid-19 vaccine crisis is putting the EU in danger
EU Economy

How the Covid-19 vaccine crisis is putting the EU in danger

The botched coronavirus vaccine campaign will cause long-term harm to the EU's economy, says Matthew Lynn.
4 Apr 2021
How the vaccine wars will harm us all
Global Economy

How the vaccine wars will harm us all

Grabbing and hoarding vaccine supplies, or even manufacturing one’s own, might seem to make sense for a state in an emergency. But the damage done to …
27 Mar 2021
The European Central Bank fumbles its way towards yield curve control
EU Economy

The European Central Bank fumbles its way towards yield curve control

The EU’s economic recovery is faltering, but its bond yields keep rising. That makes things tricky for the European Central Bank, says John Stepek. He…
12 Mar 2021
Vexing vaccine delays hit drug firms
Biotech stocks

Vexing vaccine delays hit drug firms

AstraZeneca and Pfizer are being attacked by the EU over what it claims are delays in delivering the Covid vaccine.
28 Jan 2021

Most Popular

“Joke” cryptocurrency dogecoin goes to the moon. What’s going on?
Bitcoin

“Joke” cryptocurrency dogecoin goes to the moon. What’s going on?

Dogecoin – a cryptocurrency created as a joke – has risen by more than 9,000% this year alone. Saloni Sardana looks at how something that began as an …
19 Apr 2021
The FTSE 100 has clawed back above 7,000 – how much higher can it go?
UK stockmarkets

The FTSE 100 has clawed back above 7,000 – how much higher can it go?

The FTSE 100 index has risen to over 7,000 for the first time in over a year – it now sits just above where it was in 1999. But its era of neglect cou…
19 Apr 2021
The bitcoin bubble will burst: here’s how to play it
Bitcoin

The bitcoin bubble will burst: here’s how to play it

The cryptocurrency’s price has soared far beyond its fundamentals, says Matthew Partridge. Here, he looks at how to short bitcoin.
12 Apr 2021