Terms of Greece's third bailout will depress economy

2015 ◽  
Keyword(s):  
Public Administration ◽  
Euro Area ◽  
Capital Controls ◽  
Domestic Economy ◽  
Structural Reforms ◽  
External Funding ◽  
Banking Services ◽  
Content Type ◽  
The Government ◽  
First Time

Significance In the absence of external funding, capital controls will remain. Banks will allow depositors to withdraw up to 420 euros (456 dollars)/week at one go rather than in daily installments and offer limited banking services. The government has reached agreement, in principle, with its international lenders for a third package of financial assistance. Immediate financial collapse is averted, but the new reform package -- although it contains some structural reforms in such areas as pensions, the judicial system and public administration -- is more likely to reduce than remove the danger of Greece's exit from the euro. The domestic economy has re-entered recession and lenders agree that current debt levels are unsustainable. Impacts Greek-EU negotiations exposed a lack of EU cohesion and deep divisions between the two core euro-area members, France and Germany. For the first time, euro-area leaders publicly accepted, and at times promoted, the possibility of a country exiting the euro. Greek resentment, EU inflexibility and loss of trust in Athens will hinder bailout implementation and could lead to popular unrest. The third bailout may add up to 30 billion euros to Greece's debt stock during 2016-18.

Hardening German attitudes on Greece risk a rupture

2015 ◽  
Keyword(s):  
Central Bank ◽  
Euro Area ◽  
Capital Controls ◽  
Financial Assistance ◽  
Content Type ◽  
Bank Deposits ◽  
Reform Programme ◽  
System Collapse ◽  
Greek Government ◽  
The Government

Significance Pressure is intensifying on the negotiators representing the Greek government and its creditors -- most importantly Germany -- to reach some form of agreement allowing the release of sufficient financial assistance for Greece to meet its payment obligations due by the end of June. However, the governing Greek coalition does not appear stable enough to adopt the reform programme demanded by its creditors. Meanwhile, German economic opinion on Greece is hardening, in the gathering belief that the risks to the rest of the euro-area from any concessions to Athens are now greater than those of a possible rupture. Impacts If the Greek negotiations drag on, the government may have to introduce capital controls to stem the outflow of bank deposits. Greece's central bank remains reliant on the ECB to continue authorising ELA, but opposition to ELA in Germany is growing. If the ECB withdrew ELA, Athens's choices would be to meet its creditors' demands, see a financial system collapse or exit the euro.

Time is running out for amending Greek bailout

2015 ◽  
Keyword(s):  
Euro Area ◽  
Structural Reforms ◽  
Labour Law ◽  
Fiscal Reform ◽  
Content Type ◽  
Approval Rating ◽  
The Government ◽  
Limited Compliance

Significance The left-right Greek coalition of Syriza and Independent Greeks took office late in January committed to ending the rigours of the country's bailout programme. However, euro-area partners made it clear that, unless fiscal and structural reforms continued, no further financing would be forthcoming. The government could run out of cash in April, and has produced a fiscal reform package worth a net 3.8 billion euros (4.1 billion dollars). Eurogroup finance ministers still need to approve it, but the package is already being criticised for lack of structural reforms, such as changes in pension and labour law. Impacts Even limited compliance with creditor demands will strain Syriza, whose approval rating has dropped from 83% to 60% in a month. Syriza includes a faction that would repudiate the euro and return to the drachma. Tsipras could seek to buttress Syriza's mandate by calling a snap election while dropping party dissidents from candidate lists.

Referendum sets Greece at odds with lenders

2015 ◽  
Keyword(s):  
Financial Markets ◽  
Euro Area ◽  
Commercial Banks ◽  
Capital Controls ◽  
Breaking Point ◽  
Coalition Government ◽  
Structural Reforms ◽  
Content Type ◽  
European Trade ◽  
The Eu

Significance The decision of the Syriza-led coalition government to call a referendum on the proposals from the Eurogroup of euro-area finance ministers for structural reforms to support further aid transfers precipitated a run on commercial banks, causing them to be closed for six working days, along with the imposition of capital controls. Greece's bailout programme, already extended by four months, expires tomorrow. Financial markets fell in morning European trade as hopes of a last-minute compromise were seen to have diminished. Impacts Capital controls could be extended for months causing existing businesses operational difficulties and disrupting investment in new ones. Recession would postpone the return to growth essential for Greece to begin paying down its mountainous debt (about 180% of GDP). The referendum stretches relations with the euro-area to near breaking-point but there is no mechanism for leaving without leaving the EU.

Italy’s public sector reforms face uphill battle

2021 ◽  
Keyword(s):  
Public Administration ◽  
Financial Market ◽  
Radical Change ◽  
Economic Recovery ◽  
Northern Europe ◽  
Structural Reforms ◽  
Far Right ◽  
Content Type ◽  
Public Sector Reforms ◽  
Slow Progress

Significance The PNRR is vital to revive growth in the EU’s most fragile economy. In addition to providing foundations for a strong economic recovery from COVID-19, the PNRR also focus on broader structural reforms that have long constrained competitiveness. Among these, radical change to public administration is a key element. Impacts Perceptions that the recovery plan is struggling would damage financial-market confidence in Italy’s capacity to survive in the euro-area. Slow progress on the recovery would also entrench opposition in northern Europe towards deeper EU fiscal integration. Polling support for the far-right League party has been declining, which could force it to withdraw from the Draghi government.

German shift on austerity would risk 'wrong' lessons

2015 ◽  
Keyword(s):  
Euro Area ◽  
Credit Rating ◽  
Bond Yields ◽  
Trade Surplus ◽  
Fiscal Stimulus ◽  
Content Type ◽  
Black Spots ◽  
Angela Merkel ◽  
Deficit Financing ◽  
The Government

Significance Chancellor Angela Merkel faces a rising tide of euro-area members in favour of a policy shift away from austerity and possibly towards more favourable debt deals for euro-area black spots. Adding to the pressure for change, her own voters may prefer a slower pace of debt reduction: German government debt has already been falling as a percentage of GDP -- from over 80% in 2010 to under 77% at the end of 2014 -- and debt is starting to fall in absolute terms as well. The government has delivered enough stabilisation (ie, austerity) and growth to tame the 2009-10 debt surge and maintain its AAA credit rating, but is now over-achieving in terms of its own tough targets because the greater-than-expected fall in debt interest costs is pushing the budget into surplus. Some modest spending adjustments look likely to curb this windfall surplus, yet many will argue that more could be done to re-energise the sluggish economy -- and boost the euro-area. Impacts The plummeting euro will provoke another rise in German exports (already near 50% of GDP) and tensions over Germany's bulging trade surplus. While a fiscal stimulus and/or higher wage payments could address these tensions and raise imports, there is no sign of such action. Germany's critics are gathering support to end austerity, to the point of ignoring the risks of deficit financing and reneging on debts. Ultra-low German bond yields, encouraged by the prospective supply fall, are dragging down euro-area yields, delivering wider benefits.

Politics set to slow Pakistan's divestment drive

2016 ◽  
Keyword(s):  
Public Sector ◽  
Economic Reform ◽  
Prime Minister ◽  
Structural Reforms ◽  
Short Term ◽  
Content Type ◽  
Reform Agenda ◽  
Political Patronage ◽  
The Government ◽  
Core Condition

Subject Pakistan's divestment drive. Significance Prime Minister Nawaz Sharif's government describes divestment of public sector enterprises (PSEs), involving 69 firms, as an essential part of its 2013-18 economic reform agenda. Progress thus far is limited, but the government faces rising pressure from the IMF, which made divestment a core condition of its 6.6-billion-dollar, three-year loan in September 2013. Impacts Another government led by Sharif would continue gradual divestments after 2018. Since PSEs are an important vector for distributing political patronage, structural reforms will face stiff resistance. Divestment of profitable PSEs defeats the purpose of the exercise, but the government will use them for a short-term cash boost.

Gender equality will see uneven progress in Mexico

2016 ◽  
Keyword(s):  
Gender Equality ◽  
Gender Gap ◽  
National Development ◽  
State Level ◽  
Content Type ◽  
Development Goals ◽  
The Government ◽  
Employment Of Women ◽  
First Time

Subject The Mexican government's advances towards greater gender equality. Significance President Enrique Pena Nieto has been active in promoting gender equality at home and abroad, and his government has repeatedly voiced its commitment to the UN's Millennium Development Goals, particularly regarding female empowerment. The Pena Nieto administration included a gender dimension in its National Development Plan for the first time, and has allocated significant resources to supporting women. Efforts have focused not only on the federal level, but also at state level, as illustrated by the signing of a collaboration agreement in December 2015 between the government and the National Conference of Governors. Impacts Bridging the gender gap across all government levels will be an expensive and difficult task, with uneven success across the country. Any reductions in domestic violence rates will require long-term efforts to change attitudes from the bottom up. Quotas that encourage the employment of women, regardless of merit, may perpetuate politics' reputation for being corrupt and nepotistic.

Morocco's parliamentary poll will be tight contest

2016 ◽  
Keyword(s):  
Education System ◽  
House Of Representatives ◽  
Prime Minister ◽  
Coalition Government ◽  
Focus Attention ◽  
Content Type ◽  
Justice And Development Party ◽  
Lower House ◽  
The Government ◽  
First Time

Significance The election for the House of Representatives, the lower house of parliament, will be the second since the constitution was revised in 2011. This specified that the leader of the party winning the largest number of seats should be given the first opportunity to form a government. The revision led to the moderate Islamist party, the Justice and Development Party (PJD), leading the government for the first time after its victory in the November 2011 poll. Impacts The election will focus attention on contentious reforms to pensions, subsidies and the education system. The months ahead will be dominated by speculation about party alliances and the likely shape of a future coalition government. The palace seems ready to accept a second term for Prime Minister Abdelilah Benkirane, but is also keen to see PAM within government.

Fiscal adjustment may prove painful in Uruguay

2016 ◽  
Keyword(s):  
Trade Union ◽  
Public Spending ◽  
High Income ◽  
Content Type ◽  
Public Finances ◽  
Fiscal Adjustment ◽  
Economic Climate ◽  
The Government ◽  
First Time ◽  
Economic Outlook

Subject Uruguay's economic outlook. Significance The government has determined a fiscal adjustment, with tax increases for middle- and high-income earners, delays in public spending plans and a reform of military pensions, in a bid to address worsening public finances. It is the first time that the leftist Frente Amplio (FA), in government since 2005, has faced an adverse economic climate. Impacts Austerity in a context of 'stagflation' will generate political and trade union tensions. Rising unemployment will drive a deterioration in real family incomes. Growth will remain paltry this year and next.

Tunisia’s democratic transition will struggle

2017 ◽  
Keyword(s):  
Political Parties ◽  
Democratic Transition ◽  
Prime Minister ◽  
Public Spending ◽  
Structural Reforms ◽  
Political Leaders ◽  
Content Type ◽  
Arab Uprisings ◽  
The Government

Significance This follows former Prime Minister Mehdi Jomaa’s announcement on March 29 of a new, non-ideological party that includes technocrats and former ministers -- the Alternative Party. Six years after the 2011 Arab uprisings, Tunisian politics is still in flux -- facing serious social and economic challenges. Impacts Protests and industrial strikes will continue in the months ahead as the government tries to reduce public spending. Political parties are losing the trust of the population. Further cabinet reshuffles are likely, but political leaders are wary of making bold structural reforms.

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