Just like how everyone knows that Cyclopip doesn’t have a love life, it’s also common knowledge that Greece has been struggling with its finances for the past few years. Heck, it’s already been bailed out twice in the past three years!
But we haven’t heard any bad news from the debt-ridden country for a while. That’s probably because the government has been working really hard to straighten up its finances.
Just recently, the Parliament passed laws that were demanded by the Troika when it granted Greece its bailout. These included tax reforms and categorizing some civil servants on special reserve, giving them only temporary jobs from which they will only get 75% of their wages.
It looks like Greece’s commitment to fiscal discipline is paying off though. It printed a budget surplus of 2.6 billion EUR for January to July 2013, coming from a 3.1 billion EUR deficit from 2012.
But just because we haven’t heard from Greece lately doesn’t mean that everything there is fine and dandy. German Finance Minister Wolfgang Schauble said that the country will most likely experience a shortage of funds and need another bailout. The ministry has estimated that about 4.5 billion EUR will be needed in 2014 and 5 billion EUR in 2015.
Normally, this would be bad news for the euro, right? I don’t think I need to remind you all of how the shared currency tumbled back when the Greek bailout issue was at its peak. So then why isn’t the euro falling this time around?
Well, for one, the amounts that the finance ministry estimates Greece will need in 2014 and 2015 pale in comparison to the size of its previous bailout deals. The Troika has already granted the country 240 billion EUR in aid since 2010. So in a sense, adding a few billions to that total isn’t really a big upgrade.
Furthermore, Greece hasn’t exactly been slacking off. It has been doing its best to meet the requirements laid out by the Troika and has made great progress in curbing spending. It has, however, struggled in tax collection and still needs to complete key structural reforms.
According to the European Central Bank (ECB) and leaders in Brussels, we may be jumping the gun with all this talk of a third bailout package. The euro zone will likely re-evaluate Greece’s financial aid program in mid-2014. So far, no steps have been taken towards coming up with a new rescue plan.
Still, with Greece slowly making its way back to headlines, you shouldn’t take any news coming out of the country for granted. You should know that Germany will soon have their elections in September. Who knows, if policymakers signify their unwillingness to bailout Greece, we could see the euro take another major dive.