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Thursday, July 2, 2015

Greece crisis .....PM Tsipras proposes higher taxes and pension cuts

Nice way of coming to Office, one may think – and this person is no ordinary man !

Greece is in trouble.  The Greek government-debt crisis started in late 2009, as the first of four sovereign debt crises in the eurozone - later referred to collectively as the European debt crisis. The common view holds that it was triggered by the turmoil of the Great Recession, but that the root cause for its eruption in Greece was a combination of structural weaknesses in theGreek economy along with a decade-long pre-existence of overly high structural deficits and debt-to-GDP levels of public accounts. In late 2009, fears of a sovereign debt crisis developed among investors concerning Greece's ability to meet its debt obligations, due to a reported strong increase in government debt levels along with continued existence of high structural deficits. This led to a crisis of confidence, indicated by a widening of bond yield spreads and the cost of risk insurance on credit default swaps compared to the otherEurozone countries - Germany in particular.

In May 2010, the Eurozone countries, European Central Bank (ECB) and International Monetary Fund (IMF), later nicknamed theTroika, responded by launching a €110 billion bailout loan to rescue Greece from sovereign default and cover its financial needs throughout May 2010 until June 2013, conditional on implementation of austerity measures, structural reforms, and privatization of government assets.  Later in DEc 2012 the Troika agreed to provide Greece with a last round of significant debt relief measures, while the IMF extended its support with an extra €8.2bn of loans to be transferred during the period of January 2015 to March 2016.Expectations are, that Greece, besides ultimately receiving its remaining transfer of frozen bailout funds in its second programme, will need a follow-up support programme starting 1 July 2015.

Greek PM finally concedes the country must cut pensions as bailout deal deadline nears… but can he convince government to accept it is the vital Q ?Hopes of a deal to prevent Greece crashing out of the euro have been raised after Alexis Tsipras finally conceded that his country must cut pensions as a bailout deadline nears.The Greek Prime Minister met with 19 eurozone leaders in Brussels, where he offered a package of economic reforms in an attempt to gain the approval of the country's creditors.Although a final agreement with the EU, IMF and European Central Bank, remains out of reach, the move has raised hopes that Greece will not default on a €1.6 billion (£1.1 billion) loan from the International Monetary Fund, which is due to be repaid at the end of the month.However there are concerns that Mr Tsipras' offer of €8 billion (£5.7 billion) in higher taxes and measures such as reducing pension payments over the next two years will be rejected by his radical left wing party Syriza, who were elected to power on an anti-austerity platform.

Despite positive developments overnight, a final deal to prevent Greece defaulting on its debts still has not been struck. German Chancellor Angela Merkel said that while Greece's latest plans were a 'good starting point' it was also clear that 'absolutely intensive work is necessary now.' IMF managing director Christine Lagarde said the Greek offer 'still lacks specificity' and was 'still short of everything we expected'.

The man in photo is - YanisVaroufakis, a Greek economist, currently  FinanceMinsiter of Greece.In the January 2015 general election, he was elected to the Greek parliament, representing SYRIZA.  He is a political economist, professor, and author, and has dual Greek-Australian nationality.

With regards – S. Sampathkumar

24th June 2015.

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