Nearing 'Grexhaustion'

The International Monetary Fund has poured cold water on Greece's bailout negotiations with yet more bad news.

Greece's talks with creditors remained deadlocked early this week, despite combative Greek finance minister Yanis Varoufakis reportedly being sidelined. The International Monetary Fund (IMF) piled on the pressure by saying Greece's economy was so far off track on its bailout programme that it would need more drastic austerity or debt relief from European creditors.

That raised the prospect of the IMF withholding its part of the €7.2bn in bailout money that a deal is supposed to yield. Greece is on track to run a primary budget deficit (a shortfall excluding interest payments) of 1.5% of GDP this year, instead of the 3% surplus stipulated by the rescue package. Meanwhile, the European Commission slashed its 2015 Greek GDP forecast from 2.5% to 0.5%.

What the commentators said

What we know for sure, however, is that, "deal or no deal", Greece faces bankruptcy, as Holly Ellyatt put it on CNBC. Greece's debt pile of 180% of GDP is too high to grow out of and "in no shape or form" is Greece inclined to undertake reforms to unleash faster growth, said Steen Jakobsen of Saxo Bank.

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It's a pity, as the ongoing stand-off has snuffed out what little growth there was, noted Mehreen Khan in The Daily Telegraph. The first year of growth since 2007 was 2014, but uncertainty over Greece's future in the eurozone has dented confidence and spending. The economy is shrinking, says BAML, and is set to undershoot the Commission's forecast with a 0.5% decline this year.

There are now the first signs of the Greek malaise dampening the eurozone recovery, said Capital Economics. The Business and Consumer survey from the European Commission has juddered to a halt after four months of climbing; the consumer confidence component has fallen for the first time since November. The data are a reminder "not to take a further strengthening of the eurozone's fledgling economic recovery for granted".

Andrew Van Sickle

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.