Even the Greek government accepts that without help from its Eurozone partners, it will be unable to meet all of its obligations. Failure to do so will precipitate a sovereign default which could lead to Greece being forced to abandon the Euro and, potentially, having to leave the EU itself. Help if on offer, but not unconditionally so. The Eurozone Finance Ministers agreed to extend Greece’s EU/IMF bailout for a further four months from February and to pay the final tranche of €7.2 billion, but only if an acceptable plan of action was submitted by the Greek authorities. Whilst work continues behind the scenes, it is evident that Greece has been unable or unwilling to meet the expectations of her partners. Sooner or later, the funds that Greece can call on will be exhausted. Speaking in Riga, Latvia, the German Finance Minister, Wolfgang Schraeuble, noted: "Until now, we don't have a solution, and I don't expect to get a solution in the next week".
The screw has been turned on Greece just a little further by ratings agency Standard and Poor’s which has downgraded the nation’s credit status from B-/B to CCC+/C and rather ominously notes that the outlook for the nation’s credit rating is “negative” and that the country’s debt and other financial obligations will become “unsustainable”. Were Greece to go to the markets for funding, the decision of S&P would be likely to further increase borrowing costs. According to S&P, the Greek economy has contracted by a further 1% over the last six months despite a weaker Euro and the slump in crude oil prices.
An additional worry is that the deficit figures for Greece are worse than anticipated. It was believed that the deficit had fallen to 0.8% of GDP whereas the latest figures put it at 3.5% of GDP (if we are being picky, this puts it outside of the convergence criteria for joining the Euro).
There has been much speculation as to when Greek coffers will be empty, but in a statement, S&P put it like this: "If the stalemate between Greece and its official lenders is not resolved before the middle of May, then there might not be enough time for the Greek parliament to enact whatever conditions are attached to a revised lending program”.
For its part, the Greek government insists that it will honour its financial obligations and has ruled out entering into a coalition of national unity or calling fresh elections. It has frequently reiterated its wish to remain within the Euro.