Greece faces bankruptcy in just a matter of weeks,
unless it can negotiate a debt deal with its creditors soon. The troubled
nation's debt crisis is creeping back into the news this week as Prime Minister
Alexis Tsipras was scheduled to address parliament Monday evening on the status
of the negotiations.
"We need to wait for the Greek side to present us
with a comprehensive list of reform measures which is suitable for discussion
with the institutions and then later in the Eurogroup," Martin Jaeger, a
spokesman for the German Finance Ministry, said Monday.
Here are
four things to know about Greece’s predicament.
Why Is
Greece Renegotiating Its Reforms?
Europe’s Greek drama continues to play out as Greece
and eurozone finance ministers attempt to reach agreement over the country’s
reforms in order for Athens to secure its latest 240 billion euro ($270
billion) bailout. The negotiations ended in a standoff over the weekend as the
Greek government and its creditors, including the European Commission, European
Central Bank (ECB) and International Monetary Fund (IMF), are locked in
negotiations over the reform proposals. The plan must be approved by all
creditors to unlock the latest 7.2 billion euro ($7.82 billion) wave of
financial assistance.
Athens could be pushed into default if it fails to
repay the 460 million euros ($502.5 million) it owes the IMF on April 9,
Deutsche Bank said last week. Meanwhile, Greece could run out of money April 20
if it does not secure more aid, Reuters reported last week, citing a source
familiar with the matter.
How Did
Greece Get To This Point?
Greece renegotiated the terms of its $270 billion
program last month after its far-left Syriza Party won elections in January.
Before the national elections, the Syriza Party, led by Tsipras, staged a
revolt against the budget cuts and other austerity measures under the bailout
arranged by the European Commission, ECB and IMF (known as “the troika”).
Greece's previous conservative government had agreed to the bailout terms.
Greece and Eurogroup finance ministers reached a deal
in February that would extend the country's bailout program until June.
However, under terms of the agreement, Greece is required to submit an economic
reform package that must be approved by its creditors before Athens can receive
the remaining bailout money that it needs to avoid bankruptcy.
What Is
Greece Promising In Exchange For Loans?
Although the new government had promised to eliminate
an unpopular property tax, it is likely to stay part of the final plan,
Financial Times reported. However, the list of reforms over the weekend failed
to include changes to labor laws and Greece's pension system, two key areas
that creditors have said are essential to finalizing the bailout program. The
list included a lowered target of 1.5 billion euros ($1.6 billion) in proceeds
from asset sales this year and a proposal to set up a bad bank with bailout
funds returned to the eurozone in February, a Greek finance ministry official
told Reuters.
What’s
Likely to Happen?
The short-term cost of failure to resolve the issues
is likely to be very high in Greece. It would include rebuilding the nation’s
banking system if it defaults and leaves the eurozone. "I am not sure how
Greece’s banks can survive the withdrawal of the country from the euro and from
the ECB umbrella," said Gary Burtless, a senior fellow and labor economist
at the Brookings Institution.
In the long run, Greece may fare better with its own
currency, which would surely be cheap in international markets. That would help
make Greek tourism and exports very competitive in world markets, and spur an
economic recovery, Burtless said. But the Greek government would also face a
severe recession.
“If eurozone voters make a reasonable accommodation
and reduce Greece’s required net payments, they can avoid another crisis and
help one of the union’s weakest, poorest members," Burtless said.
"However, I think a lot of German and Finnish voters feel
differently."
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