Euro Zone Might Delay Greece’s Second Bailout

There are proposals to delay Greece’s second bailout either in parts or total. This has arisen from the lack of commitment shown by Greece. If delayed, it could last until after Greece’s elections. The elections are planned for in April. Even then, the Greek leaders need to promise spending cuts and labor reforms to receive the bailout.

Though most elements for the bailout are in place, not all political party leaders from Greece seem to comply with the reforms. Some euro zone finance ministers would like legal guarantees. Talks around euro zone say there is pressure from several countries to hold off the bailout until after their elections when there is a chance of getting a solid commitment from Greece.

Meanwhile, a dept swap between Greece and private sector holders of Greek bonds can happen. If carried out, it would mean 14.5 billion redemption on euro bond payment for Greece. If not, it would result in default.

Antonis Samaras, who could be Greece’s next prime minister, has given written assurance that he would agree to the budget cuts that the euro zone prime ministers demand. Germany, Netherlands and Finland want to delay the package. They are keen on waiting till after the elections. Dutch prime minister said his patience has run out and that he needs evidence of implementation and not just promises.

Some say the delay is practically possible since there is some money left from the first 110 billion bailout from May 2010. This could mean that the talks about the second bailout could be pushed back till April. The talks of delay are apparently to put pressure on Athens. It is also seen that patience is wearing thin as Greece takes its time to sort itself out. But, Athens does seem to be improving, but is it doing it fast enough or good enough is yet to be decided.

The country’s economy has shrunk 7 percent in the last quarter of the year. This makes meeting debt targets even harder for Greece. The debt-to-GDP ratio would fall far away from the originally estimated figure. The debt-to-GDP ratio is expected to fall to 120 percent by 2020. But it looks like it might fall further to 140 percent.

The euro group on Monday will provide more information on whether there will be a delay in the bailout or they might just sign off on the Private Sector Investment.

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