At last there have been notable developments in Greece – though perhaps not the developments many were hoping for.
Although yesterday’s Eurogroup meeting resulted in the currency bloc’s finance ministers pledging to act in order to prevent a ‘Grexit’ and avoid further backlash in the debt crisis, just how Greece will meet its considerable fiscal needs remains unclear.
Eurozone finance chiefs announced that Greece would be granted an additional two years in which to contain its budget deficit, giving the struggling nation until 2016 to slash the deficit to 2 per cent of Gross Domestic Product.
This latest conciliation lessens the risk of Greece defaulting on November 16th – when treasury bills worth 5 billion Euros are due – as the nation will still have money flowing in.
After the Brussels based gathering Luxembourg Prime Minister Jean-Claude Junker commented that; ‘Greece has done a big part of what it was supposed to do, adopted an ambitious reform program and a budget for 2013 that’s impressive.’
But apparently all Greece’s achievements aren’t enough to convince European lenders to unlock the next aid package.
The decision of how to meet the 32.6 billion Euros required by Greece was delayed again, this time until a meeting on November 20th where a ‘definite decision’ will be reached. Although Junker asserted that ‘a certain number of avenues’ were being explored regarding filling the funding gap he provided no specifics. Outright debt relief has been vetoed by German, Finnish and Dutch officials.
Olli Rehn, European Union Economic and Monetary Commissioner, gave a little more detail when he said: ‘For the moment Greek debt is not sustainable and therefore we need significant reduction of the debt burden, but that does not include of haircuts to principal of public loans. There are other ways and expect it will be a combination of various options’.
Junker then went on to add that an additional meeting may have to be scheduled for the end of November in order to officially sign off the currently vague rescue package. Whether or not the International Monetary Fund will continue to be a financier also remains uncertain.
Meanwhile, a report compiled by the IMF, European Central Bank and European Commission (the ‘troika’) voiced concerns over the viability of Greece’s ‘impressive’ reform programme. The report stated: ‘The key risks concern the overall policy implementation, given that the coalition supporting the government appears fragile and some components of the program face political resistance, despite the determination of the government’.
As last week’s demonstrations prove the Greek government faces just as much public resistance as political.
As of 10:00 am
The Pound to Euro exchange rate is currently trading at 1.2542
The Pound to US Dollar exchange rate is currently trading at 1.5886
The Pound to Australian Dollar exchange rate is currently trading at 1.5254
The Euro to US Dollar exchange rate is currently trading at 1.2664
The Euro to Pound exchange rate is currently trading at 0.7971
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