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TestThe German ZEW survey is due on Tuesday 16th January and is so far the most awaited news of the first two days of this week’s trading. There is a lot of optimism in play as recent stats also show
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Greece to Miss Out on Fresh EU Bailout Funds this Month
By Isaac Ndegwa
The Eurozone will not be releasing fresh bailout money to Greece during the Bratislava meeting to be held in September 2016. EU diplomats have been quoted indicating that Athens was supposed to have implemented 15 political reforms but only two have so far been done. The implementation of the reforms was however crucial if Greece stood a chance of getting more financial support from the European Union in form of bailout money that was to be released in September 2016. Greece had also shown some sluggish action in privatizing some of the state-owned assets.
The euro zone countries had signed some agreements in 2015 to provide financial aid to Greece and other struggling economies but all under very strict conditions. The IMF, ECB and the ESM had earlier agreed to provide the financial assistance amounting to 86 billion euros by the end of 2018 on the condition that the stated financial and political reforms are carried out. The debt relief had been scheduled in tranches on condition of various short term and long term reforms within Greece. Greece is to benefit from some extension measures over economic debt even post 2018 with some agreements including interest deferral and rate caps on the already existing debt.
The previous round of talks had approved a 10.3 billion euro tranche for Greece to be availed in May (out of the total package). That was to be done in an initial round of 7.5 billion while the remainder would be availed in the fall. The situation in Greece looks bleak now as the relief will not be released as earlier planned.
IMF had talked of downgrading the global outlook forecast
That all comes at a tough time when the IMF had also told the public that it plans to downgrade the overall outlook for global economic growth in 2016. The IMF’s global economic outlook was due for release in October and talks of a downgrade will mean a 6th consecutive time when downward revisions have been carried out in the last 18 months. The IMF chair Lagarde still maintains that there have been positive steps to have more privatization in the Greece economy but not everything that could have been done was done. That has led to some more reluctance on the IMF and the Eurozone partners to complete the latest rounds of Greek bailouts.
The Greek bailouts have been fragile because it needs a two-pronged approach to solving the crisis. There needs to be significant reforms being carried out from Greek’s part while the debt provisions also have to be sustainable to suit it. The hard lining camps suggest that Greece may not see much reason to carry out reforms if financial support is assured without monitoring of standards and measurements.
The overall outlook of the global economy also needs more goodwill to encourage trade and globalization if the inequalities existing in the global economy are to work. Lagarde also suggested that she will raise up the issue of inequalities when the G20 leaders meat in Hangzhou, China later this September.
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By Isaac Ndegwa
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