Greece edges toward a new crisis as bailout quarrel persists
Greece is set to miss yet another deadline for unlocking bailout funds this week, edging closer to a repeat of the 2015 drama that pushed Europe's most indebted state to the edge of economic collapse.
Euro-area finance ministers meeting in Brussels on Monday (Tuesday NZ Time) signalled that the government of Alexis Tsipras has yet to comply with the terms attached to the emergency loans that have kept the country afloat since 2010. While Tsipras had promised the long-delayed review of the latest bailout would be completed by Monday, a European official said last week that reaching an agreement even in April is now considered a long shot.
The Greek government, which has more than €7 billion (NZ$10.7 billion) in bond payments due in July, has balked at implementing mandated reforms to its energy and labour markets while also resisting calls for additional pension cuts.
A meeting between Greek Finance Minister Euclid Tsakalotos and representatives of creditor institutions before the Brussels meeting didn't yield sufficient progress for bailout auditors to agree to return to Athens and complete the review, according to an official, who asked not to be named as negotiations aren't public.
Greece's creditors "must conclude in its review that the conditions are met and they're laid down precisely in the agreement," German Finance Minister Wolfgang Schaeuble told reporters before the meeting. "Apparently it's still difficult between the institutions and the Greek government to put the general agreement in concrete terms."
Stalled bailout reviews and acrimony between successive governments and auditors representing creditor institutions are all too familiar themes in the seven-year crisis that has reduced the Greek economy by a quarter. And while discussions continue on how to overhaul the labour market, a finance ministry official said in an email to reporters on Friday (Saturday NZT) that the issue can't be solved in talks with technocrats.
Even as Greek bonds have performed better than most of their euro-area peers this year on expectations that the government will capitulate, uncertainty has weighed on economic activity, raising the risk that an additional bailout may be needed. Unemployment rose in the last quarter of 2016, the economy unexpectedly contracted, and a bleeding of deposits from the nation's battered lenders resumed.
"The Greek recovery is once more significantly delayed by politics," said Nicholas Economides, a professor of economics at New York University's Stern School of Business. "Tsipras will blink at some point in time, the question is when."