Greece is expected to receive a third bailout in the spring on top of the €240 billion in loans it has already received from its European partners.
The terms of the package of up to €20 billion for the stricken Greek economy are being negotiated in Eurozone capitals with a decision expected in April. A German finance ministry report leaked to the weekly Der Spiegel estimated that Athens will need between €10-20 billion to service its debts and maintain its budget.
The current rescue package ends in December and has left Greece with debt at 176 percent of GDP. In the early days of the crisis any debt level beyond 120 percent of GDPO was thought by economists to be unstainable.
The IMF, one third of the so-called Troika including the European Commission and the ECB has recommended a second write down of 66 percent of Greek debt to bring it to 110 percent of GDP by 2012.
The first write down was of debt held by the private sector but not debt held or guaranteed by governments or central banks. Any new write-down must include government owned debt; there is not enough private held debt left to achieve the necessary reductions.
Germany has refused to permit any further write-down as this would incur losses that would have to be made good by Germany and German taxpayers.
Angela Merkel’s government has insisted that the necessary saving be obtained from austerity within the Greek economy and its budget.
Greece has met a euro zone demand for a primary budget surplus, that is before interest payments on debt and the economy is forecast to grow 0.6 percent this year, the first expansion since the financial crisis in the fall of 2008.
But with 28 percent unemployment and more than 60 percent among young people further austerity risks a political backlash against Prime Minister Antonis Samaras’ left-right coalition government. The government has said that it will not accept any new austerity measures or a permit continuation of the controls imposed by the European Commission, the ECB and the IMF.
The leftist opposition Syriza party led by Alexia Tsipras narrowly lost the last election, and has said it would seek a one-third write down of Greece’s sovereign debt.
The next election is scheduled for 2016.The Samaras government's slim majority in parliament would be threatened by any new austerity measures and it trails Syriza in polls. A loss on any bill in the legislature could precipitate new elections.
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