Politicians within the cash strapped country of Greece have recently warned IMF officials that the country has “no more cash” on hand to repay its financial obligations which are coming due in the next couple months. The next payments are due in June and August.
“I want to reassure the Greek people that there is no possibility or chance that the Greek government will back down on pension and labour issues,” Greek Prime Minister Alexis Tsipras said Friday May 15th regarding promises his left wing Syriza party made to voters during January elections. In those hotly contested elections, the party promised not to change the country’s current financial programs despite calls from creditors.
Greece owes the IMF 11 billion Euros – a majority of which is due in early June. However there are serious doubts whether Greece could come up with the cash needed to make the repayments. “Each week becomes more precious than those that have passed because the weeks remaining are fewer and fewer,” French Finance Minister Michael Sapin said regarding the debt crisis.
The latest round of talks began in 2010 when it was revealed to EU officials that the Greek debt to GDP ratio was higher than originally thought, going from 3.7% to 12.7%, surpassing the maximum currently allowed by the EU. “No one would have trust anymore in Europe if in the first big crisis a currency member exits,” German Vice Chancellor Sigmar Gabriel recently warned EU member states about the very real possibility that Greece could exit soon. Germany, as a major creditor, is concerned about the Greek exit because it is a major player in the bailouts that Greece has been receiving and also because Germany is one of the stronger (if not the strongest) of the EU member state economies.
The possibility of the Greek exit is not the only thing has challenged the country throughout this debt crisis as the Greek unemployment rate reached a staggering 25.7% with a majority of Greek’s youth population unemployed. Spain, Italy and Portugal are other countries within Europe who have faced similar crises with unemployment – Spain has a 23.4% unemployment rate, Italy 12.6% and Portugal 14.1%.
Greece’s current debt to GDP ratio in real time is 218.39% while the Public Debt to GDP ratio is 174.15%.
A possible exit of Greece from the EU has sparked fears that Italy, Portugal and Spain could follow given the tight economic circumstances that their countries are currently mired in.
“The lack of agreement so far is not due to the supposed intransigent uncompromising and incomprehensible Greek stance. It is due to the insistence of certain institutional actors on submitting absurd proposals and displaying total indifference to the recent democratic choice of the Greek people,” Prime Minister Tsipras said in an article published in the French daily newspaper Le Monde.
The statement of the Prime Minister highlights the frustrations that he could be feeling due to the fact he has thus far been unable to reach a deal with the myriad of creditor institutions over what they see as critical structural economic reforms within the Greek economy.
“It is a lie that the there is any optimism. There is no optimism. What the so called optimism is about is stopping panic stricken Greeks withdrawing deposits from banks,” an anonymous source said regarding the negotiations. Ultimately it is crucial for the two sides to come to an agreement where both sides can trust each other. For Greece to convince the world of their capacity for economic responsibility might just save the union and prove that the newly created EU institutions can learn from the current situation and emerge stronger for it.
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