Friday, July 17, 2015

Finance update for travelers to Greece - July 17, 2015

The Parthenon temple on the Athenian Acropolis in Athens GreeceAfter the Greek Parliament passed the first hurdle, passing legislation, getting 229 out of 300 possible votes for the austerity measures, as required under the €96 billion bailout plan to start its implementation, the European Central Bank authorized an emergency loan of somewhat under €1 billion, which would help the quickly dwindling physical cash situation in Greece, but do little else.

The IMF (International Monetary Fund), currently owed about €32 billion by Greece immediately called for significant debt restructuring in the final deal for the €96 billion bailout plan, which is essential to the success of the bailout, in my opinion, or the Greek Eurozone crisis will be back in short order.

Later yesterday European Union finance ministers approved a €7 billion series of bridge loans to Greece to allowing it to make a bond payment to the ECB (European Central Bank) Monday and clear its arrears with the IMF.

The loans are expected to be finalized today assuming Germany's parliament approves the request to open talks on a three-year bailout program, which would be Greece's third in the past five years. That bailout would be worth up to €86 billion.

With the bridge loans, Greece will be opening its banks Monday, but for Greeks the €60 limit per day will still hold Monday. The Greek Finance Minister confirmed late yesterday that the limit will be gradually lifted over time, but didn't say how fast that would be.

Next week the final negotiations will likely commence, and they could easily take weeks and could be far more difficult to conclude, especially if Prime Minister Alexis Tsipras can't hold his government together. Many in Greece, including members of its Parliament, are angry at the deal at this point, which is seriously complicating the situation. There is about to be a major shake-up of the Greek government as several high ranking government ministers voted against the measures just passed.

In my opinion, if the Eurozone finance ministers try to hold the bailout to just a few years before final loan payments will be due, in about three years Greece will be right back where it is today. If the Eurozone finance ministers are smart, they will figure out a way to listen to the IMF and do a real restructuring of all Greek debt with a reasonable pay down that Greece could actually make or they should negotiate an orderly withdrawal of Greece from the Eurozone.

So, for travelers, next week will see a general improvement in financial conditions in Greece, but it will be a small improvement. Even with the banks open travelers will still need to bring cash with them into Greece to be sure they will be able to pay their bills. Credit cards are being accepted at chain hotels and hotels with financial resources outside Greece with which to obtain cash plus restaurants and shops with similar resources. As long as negotiations move ahead the situation will continue to improve, but if negotiations in the coming weeks breakdown, travelers without cash might find themselves with very serious problems. Even if negotiations move along, it will likely be until at least early August before anything close to normalization will exist for travelers.

It's now a race against time for Greek businesses and the Greek people. It's unknown whether their runner in this financial race, the Greek government, has the stamina to finish the race, and do it fast enough to pull Greece into position not to fall down and miss the finish line again.

No comments:

Post a Comment