Greece reaches turning point as EU grants aid monies

Greece looks set to receive the next tranche in aid, despite budget shortfalls and slow progress on reforms demanded by the EU.

Reports in the German press over the week-end suggest that EU officials are now in favour of giving Greece its next tranche of aid, which will enable the country to pull back from a Eurozone exit.

Greek government officials today brought forward painful budget cuts to end a decade of primary deficits, according to Reuters. Troika officials arriving in Athens today to discuss terms with the Greek government officials were met by violent street demonstrations, as protesters vented their anger at the terms of the government’s austerity measures.

Greek premier Antonius Samras has been working to secure a €31.5bn instalment from a €130bn bail-out fund to keep the country afloat and inside the EU.

The implication is that the EU authorities have agreed that Greece must be kept in the Eurozone at all costs, and therefore that it must be given time to restructure its debts. This contrasts with the policy of withholding the aid monies as part of a strategy to force Greece to implement reforms, or to exit the Eurozone.

Yesterday, in Germany the EU strategy received backing from Peer Steinbrueck, the main opposition challenger to chancellor Angela Merkel. 

In an interview with the New York Times, Samras declared: “There is absolutely zero risk that Greece is leaving the euro.” He urged fellow Greeks to keep the faith, and that better days lie ahead. He said: “What I am telling you, is that there is hope.”

The biggest fear in Brussels is that a departure by Greece would set a precedent for others to follow, especially if the consequences for those leaving turn out not to be so catastrophic as first feared. Instead, giving Greece time to restructure its debts would finally set the country on the road towards a resolution of its financial crisis.

Today also saw progress made in the restructuring of the Greek banking sector. After protracted negotiations, Crédit Agricole has finally announced an agreement over the sale of its subsidiary Emporiki to Alpha Bank. Crédit Agricole said it would pay Alpha €550m to take Emporiki off its hands, on top of the billions already paid into the bank.

Analysts suggest the deal, which looks set to be concluded by year end, could trigger a wave of mergers and acquisitions, fundamentally restructuring the country’s banking sector.

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