4th Jul 2020

Troika: Greece should get next loan, remains in deep trouble

  • German daily Bild the same day reported that Greeks have stashed up to €200 billion - twice the bail-out sum - in Swiss bank accounts in capital flight since the crisis began (Photo: danoots)

Greece should get the next €8 billion tranche of aid promised to it but its economy remains in deep trouble, its international lenders have said.

In a keenly awaited report, obtained by the Associated Press, the European Commission, European Central Bank and International Monetary Fund noted that while the money should be paid to Greece as soon as possible, with the country at risk of soon not being able to pay its bills, its "debt dynamics remain extremely worrying."

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Crucially the inspectors also believe that a second international loan to Greece, finally agreed with great difficulty on 21 July, is not enough to be a real lifeline to Athens.

It said that while the second loan €109 billion bailout would help Greece's immediate financing needs "this could not suffice for the debt dynamics to be described as sustainable" if the country's internal reforms are insufficient.

“When compared with the outlook of a few months ago, the debt sustainability has effectively deteriorated given the delays in the recovery, in fiscal consolidation and in the privatisation plan, as well as the perspective of bank recapitalisation.”

The report will feed into crucial discussions by eurozone leaders over the coming days, culminating in a summit in Brussels on Sunday where the state of Greece's finances, European bank recapitalisation and establishing a bulletproof bailout fund are all on the agenda.

The so-called troika of lenders have recently been increasingly critical of Greece's pace of internal reforms, putting the release of the €8 billion tranche - part of last year's first €110 billion loan - into jeopardy. The criticism comes even as ordinary Greeks take to the streets in their thousands to protest the cuts to pensions, public sector wages and public services.

Meanwhile eurozone countries are at odds over much of a haircut private investors should take on Greek debt, having agreed a 21 percent voluntary haircut as part of the July deal. Germany is pushing for a much greater writedown, resisted by France whose banks are highly exposed in Greece.

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