Uncertainty remains over Greece
0 Comment(s)
Print
E-mail Xinhua, February 14, 2012
Uncertainty remains
Given the catastrophic consequences if the second bailout program doesn't come, the Greek authorities and major political parties are expected to meet the conditions raised by international creditors, experts said.
However, after the parliament vote of "yes" to the bailout plan, the political chaos and uncertainties in Athens still cast doubts over the fate of the heavily-indebted country.
Facing violent street protests in central Athens against the deeply unpopular austerity measures, the major political parties facing a general election probably due in April remains reluctant to make a written commitment to implement the "painful" austerity measures.
"So much hangs in the balance. But even if policymakers pull a deal out of the bag, there remains a clear danger that the rescue package will collapse soon after," said a note sent to Xinhua by a leading research firm Capital Economics based in London.
After all, if there is a surge in support for anti-austerity parties at the general election in April, the new government might be unable to meet the conditions of the bailout package, Capital Economic said.
Last Friday, George Karatzaferis, leader of the LAOS party, a small party in the Greek coalition government, refused to back the "tough terms" attached to the bailout program and all four cabinet members of his party submitted their resignations.
"Even if Greece accepts more austerity and structural reforms in the short term, its appetite will surely fade unless government bond yields start to fall, the banking sector begins to stabilise and economic growth returns. Such developments are a distant prospect," the note added.
However, even if the bailout program is to be approved and all austerity measures implemented, it remains to be seen whether the Greek debt burden would turn sustainable in line with the IMF's debt and financing criteria, said Capital Economics.
Citing latest official forecasts, Capital Economics said in the research note that the Greek debt-to-GDP ratio will only fall to 136 percent by 2020, falling short of the 120 percent target, from the current 160 percent, even after the private holders of the Greek bonds agreed to cut the face value of the debt by half.
Go to Forum >>0 Comment(s)