Greek Government Spars with Disarrayed Creditors; Uncoordinated Demands Leave Little Room for Maneuvering
The country has since been faced with increasingly difficult budgetary and financial decisions ever since, with the country being seen by creditors as a risky investment that lacks the necessary economic fundamentals to justify its soaring expenditures.
The country's yearly deficits have since been reined in, with the country expecting to post a marginal budgetary surplus as of this year. The road to budgetary surplus, however, has been hard fought, with deep social and economic tolls being born by Greek citizens. Slashed social services, reductions in public work forces, and sharp reductions in public pensions and safety nets alongside a backdrop of recession and economic turmoil (encapsulated by an unemployment rate resting at 25%) propelled the far left Syriza party into power this past January. The party ran on a platform of reducing austerity and renegotiating, or outright rejecting, the budgetary restraints placed on Greece by outside creditors.
These circumstances have led to the Syriza party pushing hard to bring its major creditors, namely the financial institutions of the European Union and the International Monetary Fund, back to the negotiating table to redefine the terms of its previous and forthcoming bailouts. Both institutions have refused to play ball with Syriza, choosing instead to hold the Greek government to its commitments to slash budgets despite the objections of the Greek population. The situation has brought the Greek crisis back to the fore as a standoff develops between the Tsipras/Syriza government and its creditors, with the possibility of Greece exiting the Euro again becoming a very real possibility.
Tsipras may have been weakened since he first took office, with the predictions for Greek GDP growth recently being reduced from 2.5% to 0.5%. The reduction is a significant step backwards in the Greek recovery that gives Tsipras less leverage in being able to assure creditors of Greece's ability to continue to pay off its debts.
Adding to Tsipras' dismay is apparent disunion between the EU and IMF, with the two creditors holding very separate sets of demands for the release of their bailout funds to help keep the Greek economy afloat. The IMF has refused to move away from Greece's requirement to reduce and restructure its labor regulations and pension schemes, while the EU will not allow any leeway on allowing Greece to return to deficit spending. The two requirements leave little room for Syriza to maneuver to meet the election promises that helped push it to electoral victory late last year.
Published on May 6, 2015By Travis Lindsay
Posted in ...Market Commentary