After the pro-bailout New Democracy party won the elections in Greece, the country got some relief. A new government was formed, and the new Prime Minister Antonis Samaras skipped the EU Summit (due to medical issues). This kept Greece away from the spotlight.
In the good news department, a rise in hotel reservations was recorded immediately after the elections, providing Greece some much needed foreign cash. This came after an early plunge in tourism, and doesn’t necessarily close the gap.
Nevertheless, the problems are far from over. Opposition leader Alexis Tsipras has time to build his camp until the next elections, which may come sooner than later.
Greece’s problems are far from over and also in July, Greece may jump to the headlines and impact global markets.
- Recession: Greece’s economy continues squeezing, and this is a depression. Fresh assessments discuss a squeeze of 9% (annually) in the economy during Q3 2012. In the best case scenario, Greece will have a negative growth rate of 6% in 2012, much higher than the official budget rate of 4.7%. It will probably be deeper.
- Damage done: During the period of uncertainty, foreign companies left Greece. They will not return fast. Also the rise in tourism is relative, the bigger picture of Greek tourism remains gloomy.
- Long list of demands: Given the deteriorating situation, the new government made a long list of concessions from the EU. The rather encouraging result in the EU Summit gives hope for Greece. So, German opposition to concessions might soften, but it will probably be limited, triggering the next crisis when the next tranche of aid is needed.
Negative headlines about Greece’s economy will likely be seen during July, but the bigger problems may come when the EU / ECB / IMF troika visits Greece. This has been delayed due to the elections and then the medical issues of the PM.
When the troika arrives in Greece and fully understands that Greece hasn’t made enough progress on reforms, the next crisis will begin.
While the next round isn’t expected in July, a Greek euro exit still seems inevitable, as targets are missed over and over again.
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