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Will Greece crisis balloon out of proportion? No, it's different this time

Greece has money to see it through for now, even if it fails to get next tranche of bailout funds

Reuters  |  London 

(File Photo) Demonstrators holding letters to form a banner take part in a protest against the European Central Bank, in Trafalgar Square, London, over Greece's debt repayments in 2015
(File Photo) Demonstrators holding letters to form a banner take part in a protest against the European Central Bank, in Trafalgar Square, London, over Greece's debt repayments in 2015.

It seems as if we have been here before: the fretting that a crisis with will balloon out of all proportion while the government in Athens says it will not impose one euro more in cuts on its austerity-battered public.

Cue a finance ministers meeting in

There are differences this time from two years ago when a battery of "last chance" meetings over a new brought to the brink of default as wells as bankruptcy and threatened the with its first dropout.

When the ministers have their regular meeting on Monday there will be little brinkmanship or fear of failure. For one thing, a is already in place — the argument this time is about compliance and future targets in order to get another tranche of money.

Indeed, some officials have been briefing privately that has enough money to see it through for now, even if it fails to get the next tranche of funds by the July deadline for paying back as much as 7.5 billion euros of debt falling due.

But it would not be trite to say that another festering row with is the last thing the needs when faced with a protectionist US president, leaving the European Union, and anti-euro politicians vying for power or presence in French, Dutch and German elections.

So EU officials have been urging speed in finding agreement and calmly warning of instability ahead if none is found.

"There is a common understanding that time lost in reaching an agreement will have a cost for everyone," the European commissioner responsible for the euro, Valdis Dombrovskis, told Greek news portal Euro2day.

The issue, however, is multi-layered and thus particularly complex. Part of it is about what kind of primary surplus — what is left in a surplus budget before debt obligations — must reach and run for some time.

The bailout, signed by and lenders, says 3.5 percent of gross domestic product (which would be by far the highest in the euro zone). The Monetary Fund, the other major lender, says that is undoable without further Greek belt-tightening.

It says 1.5 per cent of GDP and some form of debt relaxation — for example, over what is paid when — would be more realistic and sustainable.

The IMF, furthermore, says it won't participate in any that it does not believe to be viable. Germany and others say that the must be a part of the or there is no deal.

Both lenders have told they want about 3.6 billion euros in additional savings, including a reduction in the tax- free income threshold, now at about 8,600 euros per person per year, a number the maintains lets some 56 per cent of wage-earning Greeks escape paying income tax.

says no. Its contracted again in the fourth quarter of 2016, nearly one in four Greeks is unemployed and its pensioners have already seen 11 cuts to income.

So plenty of scope for the crisis,  if not quite yet.

Growth Mode

This old-but-new pressure comes as the euro zone's overall is beginning to pick up. How sustainable it is, however, may be seen on Tuesday when research firm Markit releases its flash — or preliminary — purchasing manager indexes for the euro zone, France, and Germany, as well as for the United States.

Reuters polls suggest that the composite indexes — which test the views of manufacturing and services businesses and correlate closely with economic growth — will be down for Germany and France, if still in growth mode.

The index is expected to be flat, held up presumably by member countries where there is no flash report, such as Spain.

The US manufacturing index, in the meantime, is expected to dip slightly.

This all points to an easing off of growth, but not one that necessarily presages trouble ahead.

EU-quitter Britain, meanwhile, is not so blessed. It is doing well but has just had the first signs of Brexit economic trouble. Consumers in January were hit by rising inflation and factory input prices rose 20.5 per cent to their highest since 2008.

A report by the Confederation of British Industry, due on Monday, may show whether any of it has spilt over into industrial orders — although the weaker pound should help exports and offset any slowdown.

Slightly off the beaten path, meanwhile, is Israel, which has shown some surprising recovery. Its gross domestic product surged at an annualised 6.2 per cent in the fourth quarter of last year and it has just shaken off 28 months of deflation.

Look for industrial output numbers and a Bank of Israel meeting next week for more.

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Will Greece crisis balloon out of proportion? No, it's different this time

Greece has money to see it through for now, even if it fails to get next tranche of bailout funds

Greece has enough money to see it through for now, even if it fails to get the next tranche of bailout funds by July
It seems as if we have been here before: the fretting that a crisis with will balloon out of all proportion while the government in Athens says it will not impose one euro more in cuts on its austerity-battered public.

Cue a finance ministers meeting in

There are differences this time from two years ago when a battery of "last chance" meetings over a new brought to the brink of default as wells as bankruptcy and threatened the with its first dropout.

When the ministers have their regular meeting on Monday there will be little brinkmanship or fear of failure. For one thing, a is already in place — the argument this time is about compliance and future targets in order to get another tranche of money.

Indeed, some officials have been briefing privately that has enough money to see it through for now, even if it fails to get the next tranche of funds by the July deadline for paying back as much as 7.5 billion euros of debt falling due.

But it would not be trite to say that another festering row with is the last thing the needs when faced with a protectionist US president, leaving the European Union, and anti-euro politicians vying for power or presence in French, Dutch and German elections.

So EU officials have been urging speed in finding agreement and calmly warning of instability ahead if none is found.

"There is a common understanding that time lost in reaching an agreement will have a cost for everyone," the European commissioner responsible for the euro, Valdis Dombrovskis, told Greek news portal Euro2day.

The issue, however, is multi-layered and thus particularly complex. Part of it is about what kind of primary surplus — what is left in a surplus budget before debt obligations — must reach and run for some time.

The bailout, signed by and lenders, says 3.5 percent of gross domestic product (which would be by far the highest in the euro zone). The Monetary Fund, the other major lender, says that is undoable without further Greek belt-tightening.

It says 1.5 per cent of GDP and some form of debt relaxation — for example, over what is paid when — would be more realistic and sustainable.

The IMF, furthermore, says it won't participate in any that it does not believe to be viable. Germany and others say that the must be a part of the or there is no deal.

Both lenders have told they want about 3.6 billion euros in additional savings, including a reduction in the tax- free income threshold, now at about 8,600 euros per person per year, a number the maintains lets some 56 per cent of wage-earning Greeks escape paying income tax.

says no. Its contracted again in the fourth quarter of 2016, nearly one in four Greeks is unemployed and its pensioners have already seen 11 cuts to income.

So plenty of scope for the crisis,  if not quite yet.

Growth Mode

This old-but-new pressure comes as the euro zone's overall is beginning to pick up. How sustainable it is, however, may be seen on Tuesday when research firm Markit releases its flash — or preliminary — purchasing manager indexes for the euro zone, France, and Germany, as well as for the United States.

Reuters polls suggest that the composite indexes — which test the views of manufacturing and services businesses and correlate closely with economic growth — will be down for Germany and France, if still in growth mode.

The index is expected to be flat, held up presumably by member countries where there is no flash report, such as Spain.

The US manufacturing index, in the meantime, is expected to dip slightly.

This all points to an easing off of growth, but not one that necessarily presages trouble ahead.

EU-quitter Britain, meanwhile, is not so blessed. It is doing well but has just had the first signs of Brexit economic trouble. Consumers in January were hit by rising inflation and factory input prices rose 20.5 per cent to their highest since 2008.

A report by the Confederation of British Industry, due on Monday, may show whether any of it has spilt over into industrial orders — although the weaker pound should help exports and offset any slowdown.

Slightly off the beaten path, meanwhile, is Israel, which has shown some surprising recovery. Its gross domestic product surged at an annualised 6.2 per cent in the fourth quarter of last year and it has just shaken off 28 months of deflation.

Look for industrial output numbers and a Bank of Israel meeting next week for more.
image
Business Standard
177 22

Will Greece crisis balloon out of proportion? No, it's different this time

Greece has money to see it through for now, even if it fails to get next tranche of bailout funds

It seems as if we have been here before: the fretting that a crisis with will balloon out of all proportion while the government in Athens says it will not impose one euro more in cuts on its austerity-battered public.

Cue a finance ministers meeting in

There are differences this time from two years ago when a battery of "last chance" meetings over a new brought to the brink of default as wells as bankruptcy and threatened the with its first dropout.

When the ministers have their regular meeting on Monday there will be little brinkmanship or fear of failure. For one thing, a is already in place — the argument this time is about compliance and future targets in order to get another tranche of money.

Indeed, some officials have been briefing privately that has enough money to see it through for now, even if it fails to get the next tranche of funds by the July deadline for paying back as much as 7.5 billion euros of debt falling due.

But it would not be trite to say that another festering row with is the last thing the needs when faced with a protectionist US president, leaving the European Union, and anti-euro politicians vying for power or presence in French, Dutch and German elections.

So EU officials have been urging speed in finding agreement and calmly warning of instability ahead if none is found.

"There is a common understanding that time lost in reaching an agreement will have a cost for everyone," the European commissioner responsible for the euro, Valdis Dombrovskis, told Greek news portal Euro2day.

The issue, however, is multi-layered and thus particularly complex. Part of it is about what kind of primary surplus — what is left in a surplus budget before debt obligations — must reach and run for some time.

The bailout, signed by and lenders, says 3.5 percent of gross domestic product (which would be by far the highest in the euro zone). The Monetary Fund, the other major lender, says that is undoable without further Greek belt-tightening.

It says 1.5 per cent of GDP and some form of debt relaxation — for example, over what is paid when — would be more realistic and sustainable.

The IMF, furthermore, says it won't participate in any that it does not believe to be viable. Germany and others say that the must be a part of the or there is no deal.

Both lenders have told they want about 3.6 billion euros in additional savings, including a reduction in the tax- free income threshold, now at about 8,600 euros per person per year, a number the maintains lets some 56 per cent of wage-earning Greeks escape paying income tax.

says no. Its contracted again in the fourth quarter of 2016, nearly one in four Greeks is unemployed and its pensioners have already seen 11 cuts to income.

So plenty of scope for the crisis,  if not quite yet.

Growth Mode

This old-but-new pressure comes as the euro zone's overall is beginning to pick up. How sustainable it is, however, may be seen on Tuesday when research firm Markit releases its flash — or preliminary — purchasing manager indexes for the euro zone, France, and Germany, as well as for the United States.

Reuters polls suggest that the composite indexes — which test the views of manufacturing and services businesses and correlate closely with economic growth — will be down for Germany and France, if still in growth mode.

The index is expected to be flat, held up presumably by member countries where there is no flash report, such as Spain.

The US manufacturing index, in the meantime, is expected to dip slightly.

This all points to an easing off of growth, but not one that necessarily presages trouble ahead.

EU-quitter Britain, meanwhile, is not so blessed. It is doing well but has just had the first signs of Brexit economic trouble. Consumers in January were hit by rising inflation and factory input prices rose 20.5 per cent to their highest since 2008.

A report by the Confederation of British Industry, due on Monday, may show whether any of it has spilt over into industrial orders — although the weaker pound should help exports and offset any slowdown.

Slightly off the beaten path, meanwhile, is Israel, which has shown some surprising recovery. Its gross domestic product surged at an annualised 6.2 per cent in the fourth quarter of last year and it has just shaken off 28 months of deflation.

Look for industrial output numbers and a Bank of Israel meeting next week for more.

image
Business Standard
177 22