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Greece debt crisis

by Ashraf Laidi


Now that Greece has repaid € 766mn in principal to the International Monetary Fund, we revert to EU-Greece negotiations on the economic reforms required for Athens to obtain the remaining €7.2bn of its bailout program, which ends next month.

This week’s reports indicated that Greece has used up all of its remaining €650 mn at its IMF coffers to pay for the €766mn. This raises the urgency for PM Tsipras to finalise reforms needed to obtain much needed liquidity.

What it needs to pay?

If €766mn was hard to obtain, then how (and what) will Athens do meet the four loan repayments to the IMF--totalling €1.6bn—by end of June?

What it got from ECB

Greece hasn’t received any new funds from its international lenders since August. The only source of liquidity available to Greek lenders since February has been the Emergency Liquidity Assistance lifeline to Greek banks by the European Central Bank. Today, the ELA has been raised by €1.1bn to €80bn

What will it get after repaying in June?

Greek banks will continue relying on ECB’s weekly ELA, until deal is reached with international lenders for the €7.2 bn to be disbursed

What’s stalling the negotiations?

The main points of contention in reforms negotiations remain over pension cuts, VAT hikes and labour market liberalisation. No progress had been made since February.

Tsipras’ referendum option

Tsipras is left with the option of calling snap elections, or more likely a referendum on staying/leaving the Eurozone in the event that no deal is reached with the Eurozone. With polls showing Greeks wanting to vote to stay in the Eurozone, Tsipras would be obligated to wave the list reforms to his people as the condition to stay in, while bypassing the anti-austerity hardliners in his Syriza party. This way, Tsipras remains PM, Syriza retains power (with added vote of confidence), Greece keeps the euro and austerity sceptics are out.

If those funds are paid by June, then Greece would have passed its 2nd bailout, and a …3rd bailout is most likely.

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