Greek pain to stay despite rescue package
The Greek parliament has approved tough austerity measures ordered by the “troika” in return for a €130 billion bailout.
Both the Euro and the Dollar have gained on the news, which is not seen as a reason for fundamental joy. “The problem of a default hasn’t been decided yet – it’s been just put off to another time,” Anna Bodrova of Investcafe explains.
Now the European Union, the International Monetary Fund together with the European Central Bank will have a final say on Wednesday this week.
Anyway, the Euro zone member states will need to agree on some issues domestically as well, after the “troika” comes to a decision. Germany, the largest economy among 17 Eurozone member states as well as the biggest “sponsor” to the rescue package, plans a special meeting of Bundestag in two weeks time. The country itself has taken a tougher stance, asking for particular steps to be realized. “We don’t need promises anymore,” said Wolfgang Schauble, German Finance Minister, in an interview to a German paper Welt am Sonntag.
Time is running out for a signed sealed and delivered agreement with Greece’s creditors. The country has bond obligations coming due, and needs to swap them by March 20 to cut the state debt by €100 billion. This will pave the way for a programme to restructure its €14.5 billion obligations maturing on the same date.
Also, Greece needs to receive almost €80 billion tranche from the EU and the IMF before March 20. This is to help the local banks, which will suffer from a write off of the sovereign debt they are currently holding.
The package, including massive jobs cuts in the state sector, as well as a reduction in the minimum wage, will cost the Greek economy around €3.3 billion, or 1.5% of its GDP. And the estimates of the GDP fall in 2012 are becoming gloomier, from around a 4% fall to about 6.5%.