Some Analysts Aren’t Writing Off Fourth Greek Bailout

October 15, 2017

ATHENS – Even as Prime Minister and Radical Left SYRIZA leader Alexis Tsipras continues to crow he has saved Greece and brought it toward recovery, speculation remains whether a fourth bailout will be needed when three rescue packages of 326 billion euros ($385.37 billion) expires at the end of August, 2018.

Greeks have been buried under more than 7 ½ years of repeated pay cuts, tax hikes, slashed pensions and worker firings attached to the bailouts and have shown their ire with Tsipras for reneging on anti-austerity promises, walking away from him in droves with his popularity plummeting to around 10 percent.

Greece in July floated a test market return bond that sold but at interest rates more than three times higher that it’s paying for the bailouts but the government is considering more as a warm-up to what it hopes will be the end of international aid.

“There’s no political appetite for another program, either in Athens or among creditors, but the Eurogroup will want to keep Greece on a leash to ensure its loans are repaid and that the government keeps reforming, so the question is what’s the best arrangement to achieve that,” Mujtaba Rahman, Managing Director of Eurasia Group, a consulting firm in London told the Bloomberg news agency.

With a host of reforms still undone as talks continue over the unfinished conditions of the third bailout, this one for 86 billion euros ($101.66 billion), the government must show it can meet fiscal targets and convince investors to return as well even after they were burned with 74 percent losses six years ago under a previous government.

Low financing obligations in the coming years and the promised additional debt relief measures by next summer may also make a clean exit easier. The debt profile and a planned cash buffer buildup should convince investors that Greece doesn’t need a credit line or new bailout loans after 2018, some officials involved in the talks said, the news agency reported.

But skeptics remain as the government has found dissidents in SYRIZA are trying to block key privatizations.

Greece needs “reforms that will attract investment, particularly from abroad,” said Athanasios Vamvakidis, a strategist at Bank of America Merrill Lynch in London. “However, this is where implementation has been the slowest.”

“We should know by now that long delays in concluding program reviews hurt the Greek economy,” Vamvakidis said, adding that “the next program review will also be difficult, given its focus on structural reforms. Greece should break from the past and conclude this review on time, it was said to avoid the fourth bailout talk.


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