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Greece
Athens is likely to leave the eurozone and the EU if it fails to reach an agreement to unlock a €7.2 billion bailout installment, said a statement from the Bank of Greece.
“Failure to reach an agreement would, …, mark the beginning
of a painful course that would lead initially to a Greek default
and ultimately to the country’s exit from the euro area and –
most likely – from the European Union,” the bank said in a
statement Wednesday.
Greece bailout talks sink, default dra(ch)ma loom?
http://t.co/PbDwkL1paxpic.twitter.com/KeDuIsuE4B
— RT (@RT_com) June 16,
2015
The manageable debt crisis Greece is now facing may turn into an
uncontrollable and broader crisis, dangerous for the banking
system and financial stability, the bank added. An exit from the
eurozone would only add to hostility that is already felt, and,
as a result, a deep exchange rate crisis would make inflation
skyrocket.
“All this would imply a deep recession, a dramatic decline in
income levels, an exponential rise in unemployment and a collapse
of all that the Greek economy has achieved over the years of its
EU, and especially its euro area, membership. From its position
as a core member of Europe, Greece would see itself relegated to
the rank of a poor country in the European South,” the bank
said.
This is why the bank called a debt deal a “historical
imperative” impossible to ignore.
READ MORE: Greek failure would mean eurozone end
– Tsipras
The five-months of inconclusive negotiations have led to a high
level of uncertainty in Greece, which is hitting the country
hard, the bank said. This reflected in higher Greek bond yields
and Greek businesses losing financing in the capital markets.
“On the domestic front, heightened uncertainty was reflected
in the deterioration of economic sentiment and confidence
indicators and in bank deposit withdrawals by businesses and
households.”
Between October 2014 and April 2015 €30 billion was withdrawn
from deposits, the bank said.
Fears of Greece leaving the euro escalated after the country
delayed a €300 million payment to the IMF on
June 5, saying it’ll bundle four June payments totaling €1.6
billion together and pay them at the end of the month.
So far the negotiations have failed to meet halfway over reforms in Greece which
is the main condition for Athens to receive the last €7.2 billion
tranche of the second bailout. But the Bank of Greece said a
compromise on the main conditions and smaller issues remained to
be covered.
Greece maintains it won’t accept new deep austerity cuts while
the country’s creditors – the IMF, the ECB and the European
Commission – insist on more financial responsibility from Athens.
Despite some write-offs of Greek debt made by creditors in 2012,
its public debt currently stands at €316 billion, about 175
percent of the country’s GDP. The maximum acceptable level for
the EU should be not more than 60 percent of GDP, according to
the EU’s Stability and Growth Pact.
Austerity measures have seen unemployment rise from 12 to 27
percent in three years, GDP has fallen by 26 percent since 2008,
Greeks are under a huge tax burden, and the number of people
living below the poverty line is increasing every day, said Prime
Minister Alexis Tsipras last week. His Syriza party came to power
promising to end austerity.
Over the last five years, Athens has reduced pensions by up to 44
percent, reduced salaries in the private sector by up to 32
percent, and seen its labor market crushed, he added.