Fiscal Balance in Greece
Greece - Fiscal Balance
Greece has tough road ahead to prepare for troika’s return
Uncertainty regarding Greece’s financial sustainability is mounting not long after the country returned to international markets. The government has its work cut out for it prior to the troika’s scheduled mid-September visit to ensure that it complies with the requirements for the release of its next funding tranche. The Greek government raised EUR 1.5 billion from the sale of bond with a three-year maturity, which reached a yield of 3.5% on 10 July. The auction was held exactly three months after the government returned to the market for the first time in four years on 10 April. However, international lenders still doubt that the country can sustain itself financially through bond sales and thus avoid a third bailout. Demand for the latest bond offer was lower than expected. This was primarily due to weak sentiment in the international market, particularly in peripheral countries of the Eurozone.
Troika representatives are expected to return to Greece to conduct the fifth official review of the country’s adjustment program in the middle of September. The government must push forward six “prior actions” in advance of the review. The actions, which were agreed to in the bailout program, are key to the release of EUR 1.0 billion in funding. The Parliament is expected to vote on the multi-bill on early August.
The two hot topics during the troika’s visit will be the government’s financing gap for next year and the ways to fill it, as well as the amount of extra funds Greece will need to inject into its banks. The IMF estimates that the 2015 financial gap will be EUR 12.6 billion. Regarding recapitalization costs, a clearer figure will be available after the European Central Bank conducts its stress test in October of this year. The Greek government does not believe that it will be necessary to inject extra capital into its banks and thinks that it can cover the financing gap by using EUR 11.5 billion that is leftover from the bailout funds that were already disbursed. However, the Troika said that this proposal is unacceptable since a recapitalization buffer is still necessary.
Despite the Greek government’s intentions to gain full market access, international creditors are doubtful that the country can sustain itself financially FocusEconomics panelist do not expect the government to inject extra funds into its banks and thus forecast a government deficit of 2.1% in 2014, which is up 0.1 percentage points from last month’s estimate. In 2015, the panel expects the fiscal deficit to shrink to 1.4%.
Greece - Fiscal Balance Data
|Fiscal Balance (% of GDP)||-13.2||-3.6||-5.6||0.5||0.7|
5 years of economic forecasts for more than 30 economic indicators.
|Bond Yield||3.06||0.76 %||Jul 11|
|Exchange Rate||1.13||0.65 %||Jul 11|
|Stock Market||863||-1.46 %||Jul 11|
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Greece: New Democracy clinches victory in general election; slow pace of economic recovery set to continue
July 23, 2019
In line with what opinion polls had anticipated, the conservative New Democracy (ND) party, headed by now Prime Minister Kyriakos Mitsotakis, comfortably won the 7 July snap general election.
July 11, 2019
The number of unemployed workers declined by 26,925 in April compared to March while the seasonally-adjusted unemployment rate fell to 17.6% from 18.2% in the previous month, according to data released by the Hellenic Statistical Authority (ELSTAT).
July 10, 2019
Industrial production declined 1.2% year-on-year in working-day adjusted terms in May, marking the sharpest fall in over three years and contrasting April’s revised 1.7% increase (previously reported: -0.8% year-on-year).
July 1, 2019
The IHS Markit manufacturing Purchasing Managers’ Index (PMI) dropped to 52.4 in June from 54.2 in May, the lowest level in nearly two years.
June 25, 2019
After suffering a resounding defeat to the conservative opposition New Democracy (ND) party in the European and local elections last month, Prime Minister Alexis Tsipras, head of the ruling left-wing Syriza party, called snap general elections for 7 July, nearly four months before the end of his term.