Don’t Bet on a Happy New Year for Greece

It’s been something of an “annus horribilis” for Greece, with the country brought close to financial ruin and leaving the euro zone in summer. Capital controls are still in place and next year could bring more political and economic volatility, analysts believe.

Elections in January brought Syriza to power. The radical left anti-austerity grassroots movement promised to oppose government spending cuts at all costs.

But after months of tortuous negotiations with international lenders, anti-European rhetoric and a referendum on opposing austerity, Greece’s ruling party did a U-turn in summer. It capitulated to lenders’ demands for even more austerity in return for a third bailout package.

In total, Greece’s three bailouts since 2010 have seen the country receive almost 330 billion euros ($349.6 billion) in aid from the bodies overseeing it: the European Central Bank, European Commission and international Monetary Fund (IMF).

Muddying the waters with lenders, however, Tsipras appeared to be pushing for the IMF to stay out of the country’s latest bailout, telling the Financial Times newspaper at the weekend that he was “puzzled by the unconstructive attitude of the fund on fiscal and financial issues.”

He indicated that the IMF should leave his country’s third bailout to the euro zone when it decides whether to stay involved early next year. “We think that after six years of managing in extraordinary crisis, Europe now has the institutional capacity to deal successfully with intra-European issues.”

Lack of strategy

The issue of debt forgiveness still remains, however, with many (including the IMF) saying that without debt restructuring, Greece’s economy will not be able to get back on its feet. The IMF predict that Greece’s economy will shrink by 1.3 percent in 2016 and that unemployment would remain high, at 27.1 percent


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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam