Greece is now able to raise money in markets after €289bn bailout ends
The head of the European Stability Mechanism, the euro zone’s bailout fund, has wasted no time stressing the point that the debt-Stricken country will be subject to a strict regime of enhanced surveillance post-bailout, reports Helena Smith from Athens:
Speaking to the Greek daily Ethnos this morning Klaus Regling, the rescue fund chief, emphasized that Athens will be strictly monitored in the coming years so there is no let up in reform implementation.
“Greece is exceptional. It has received much more loans from us than any other country,” he told the paper, saying that Athens unlike any other member state had also benefited from “ huge amounts of debt relief.”
And Greece will also continue to be monitored:
In Greece conclusion of bailout doesn’t imply end of policy conditionality – in September European Commission will visit country to go through 2019 budget – meanwhile ESM, ECB and IMF will conduct first post-programme assessment, which will condition future access to markets
On the other hand, Greece still faces serious challenges, according to Joan Hoey, director for Europe at The Economist Intelligence Unit:
There has been lots of pain, but to what gain, and to what purpose has the Greek government signed up to multi-decade, large primary budget surplus targets which are likely to hobble growth?
The economy has been in almost permanent recession since 2010, and real GDP has shrunk by more than a quarter from its pre-crisis peak in 2007-08. Unemployment is still about 20%, and youth unemployment is more than double that. Despite undertaking the biggest post-crisis fiscal adjustment of any euro zone country, Greece’s public debt is equal to about 180% of GDP. ESM fiscal and structural reform policies, to which Greece will remain subject after the third economic adjustment programme expires, are unlikely to generate sufficient economic growth to mitigate the country’s debt burden or reduce popular disaffection. Grexit is not a short-term risk, but Greece will struggle to improve competitiveness inside the euro area or grow its way out of its huge debt burden (179.1% of GDP in 2017), so it will remain a significant risk over the medium and long term.
The austerity measures undertaken by Greece will lead to a sustainable recovery, says European economics commissioner Pierre Moscovici.
Speaking as the country exits its bailout programme, he said:
The extensive reforms Greece has carried out have laid the ground for a sustainable recovery: this must be nurtured and maintained to enable the Greek people to reap the benefits of their efforts and sacrifices.
EU’s Moscovici Says Greece Must Ensure Continued Implementation Of Reforms
EU’s Moscovici Says Greek Economic Growth Expected To Remain Around 2Pct In 2018, 2019
Back with Greece, and here is a link to the European summary of the main statistics:
The conclusion of Greece’s stability support programme opens the door to a new chapter for Greece. See here for key facts and figures: https://t.co/0d2nhW2Sk8
Here’s our story on the tensions between Turkey and the US:
Related: Shots fired at US embassy in Turkey
President Tayyip Erdogan has been speaking again about the crisis which has laid low Turkey’s currency and prompted a market sell-off. Reuters reports:
[Erdogan] said on Monday an attack on Turkey’s economy was no different from a strike against its flag or the Islamic call to prayer, responding to a recent currency sell-off in stark religious and nationalist terms ahead of a major Muslim holiday.
In a pre-recorded address to mark the four-day Eid al-Adha festival, which starts on Tuesday, a defiant Erdogan said the aim of the currency crisis was to bring “Turkey and its people to their knees”.
Amid the tension, several gunshots were fired on Monday from a vehicle at the U.S. Embassy in the Turkish capital. Nobody was hurt.
“The attack on our economy has absolutely no difference from attacks on our call to prayer and our flag. The goal is the same. The goal is to bring Turkey and the Turkish people to their knees – to take it prisoner,” Erdogan said in the televised address.
German Govt Spokesman Says It Is Up To Turkey To Decide Whether It Wants To Ask IMF For Help
German Gov’t Spokesman Says Possible Financial Aid For Turkey Will Not Be At Centre Of Talks With Turkish Leaders
Markets are continuing to head higher, as investors shrug off the continuing concerns about Turkey and concentrate on the prospects for US-China trade talks.
The FTSE 100 is up 0.55%, while Germany’s Dax has added 0.93% and France’s Cac has climbed 0.63%. Joshua Mahony, market analyst at IG, said:
The fears of last week seem to have been washed away with a renewed optimism over the direction of US-China trade. Markets often find it difficult to focus on one topic, and thus with the focus now shifting away from Turkey and towards China, it comes as no surprise that the pessimism of last week is fading into obscurity.
As Greece exits its bailout, new government figures show a drop in the country’s current account surplus compared to a year ago, but a rise in tourist revenues. Reuters reports:
Greece’s current account balance showed a smaller surplus in June compared to the same month a year earlier on the back of a wider trade deficit, the Bank of Greece said on Monday.
Central bank data showed the surplus fell to 210 million euros ($240.18 million) from a surplus of 737 million euros in June 2017. Tourism revenues increased to 2.33 billion euros from 2.007 billion in the same month a year earlier.
“In June the current account … (was) down by 527 million euros year-on-year, as a result of a deterioration principally in the balance of goods and to a lesser extent in the primary income account,” the Bank of Greece said.
It said the trade gap rose by 535 million euros as imports outstripped exports, mainly the result of a worsening in the oil balance.
And another reality check:
Here’s more on the forthcoming press conference on Greece:
Back in the UK, and luxury handbag marker Mulberry has seen its shares slump 26% after it warned it would take a £3m hit from House of Fraser’s administration. Our full report is here:
Over in Turkey and the lira has edged lower again, down 1.4% at 6.09 against the dollar. But this is a far cry from its all time worst level against the US currency of 7.24 which it hit at the start of last week as economic crisis unfolded.
But the strain between Turkey and the US over the detention of a US pastor can be seen by the firing of gun shots at the American embassy in Ankara earlier this morning.
Jamie McGeever at Reuters has a few sobering facts as Greece “returns to normal”:
As Greece exits international bailout programmes, it’s worth remembering:
– 500k people, mostly young, emigrated
– Unemployment hit 27.8% (still >20%)
– Youth unemployment reached 60%
– Economy shrank by 25%
– Debt/GDP ballooned to 180%
– Suicide & depression rates rose sharply
Markets in Europe are marginally better as traders return to their desks after the weekend break.
The FTSE 100 is up 0.33%, France’s Cac has climbed 0.32% and Germany’s Dax is 0.34% better.
Today Greece returns to normal, according to Portugal’s finance minister and head of the eurogroup:
#Greece is now in a position where it can enjoy the full extent of €A membership, abiding by same rules as every other #euro country. In that sense, Greece today returns to normal. So welcome back. Video-statement: https://t.co/W4tiHtPgzO pic.twitter.com/6HGBo735dg
Giorgos Papakonstantinou, who was finance minister when Greece signed up to the bailout, said he would do the same again if the country was in the same position.
He told the BBC’s Wake up to Money programme:
The choice we had at that point was either to allow the country to go bankrupt by not paying our debts… at which point we would not have been able to pay salaries and pensions and provide basic public services.
Or to sign a bailout which would give us time to reduce those deficits.
Unfortunately I give a high probability that Greece will enter a new crisis three to five years from now, partly because Greece still has a very high level of debt and it has to repay a lot in the near term.
If Greece’s growth slows down long-term, then markets might become very nervous and Greece will enter a new crisis.
European markets are expected to make a mixed start to the week:
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
It’s a momentous day for Greece and its government led by prime minister Alexis Tsipras. After eight years and innumerable late night eurozone crisis meetings, the country is exiting its bailout programme. The so-called troika of creditors – the European Union, the European Central Bank and the International Monetary Fund loaned Greece a total of €289bn in three tranches in 2010, 2012 and 2015.
It is a tale of incompetence, of dogma, of needless delay and of the interests of banks being put before the needs of people. And there will be long-term consequences. When Greece first received help in 2010, the plan was for it to have access to the financial markets within two years. It has taken two further rescue packages and six years for that to happen.
The slump in the Turkish lira is on traders’ minds as the fear of contagion into the eurozone is likely to remain a dominant theme. It was reported that emerging market funds were already trimming their exposure to the country in July, and that was even before the severe decline in the lira. Over the weekend, the central banks of Qatar and Turkey signed a currency swap agreement, and this follows on from the $15 billion that the gulf state pledged to invest in the country. Dealers are still scared that banks that have lent money to Turkish finance houses could face defaults, and it is possible we might see an increase in non-performing loans in the Turkish banking system, and that could seep into the eurozone.
Turkish markets are closed this week, which means volumes will be particularly low, therefore big swigs could be expected potentially unnerving traders once again.