The Economist explains: Why Greece is in trouble (again)

by / Tuesday, 16 June 2015 / Published in Economy

Why Greece is in trouble (again)

Why is the euro zone still arguing about Greece? Greece cannot pay its own bills and debts, and is locked out of capital markets. It therefore needs financial support from “official” lenders: the euro zone and the IMF. But before coughing up bail-out funds, these creditors demand reforms and budget cuts to place the Greek economy on a sounder long-term footing. Some of these conditions have proved very difficult for successive Greek governments to meet.This has been the choreography ever since the first Greek bail-out five years ago. But in January, brutalised by an economic depression that saw output drop by one quarter of GDP, Greece’s voters elected a government led by the radical left-wing party Syriza. Armed with a mandate to tear up the hated “memorandum” (the creditor-imposed conditions for assistance), the government, led by Alexis Tsipras, set about trying to change the terms of Greece’s second bail-out, which has €7.2 billion remaining in the kitty. But Greece’s creditors, including the other euro-zone governments, held firm. In February the two sides agreed to extend the bail-out by four months, until June 30th. But very little progress has been made since then.What does each side want?Strong disagreements remain in a number of areas. One of the trickiest is pension reform. The creditors want Greece to make various cuts to its …<div class="og_rss_groups"></div>
Source: The Economy