Greece Much Closer to Fiscal Cliff Than America
Posted By: Patrick Allen | CNBC EMEA Head of News
| 11 Jul 2012 | 04:58 AM ET
As Washington debates how to avoid falling off a fiscal cliff before the end of the year and American borrowing for 2012 edges closer to a trillion dollars, Greece has climbed the cliff and is wondering if it will be forced over the edge.
Numerous reports have speculated in recent days on exactly when the new government will run out of money if it does not get a big check quickly from the European Union and International Monetary Fund (IMF) . Some believe Athens will be unable to pay pensions and public sector workers by next Friday while others point to a Greek bond held by the European Central Bank which matures on August 20 as the point at which the cash runs out.
It is difficult for investors to know exactly when the cash will run out when the new Greek finance minister is himself unsure.
Yiannis Stournaras told CNBC in Brussels on Tuesday that discussions on when the next tranche of aid from the EU and IMF would be paid were "difficult".
“I can't say at the moment. We have discussed it, we made a presentation on the Greek economy, which did not differ much from the presentation from the European Commission’s or the Troika's,” said Stournaras.
“They ask us to bring the program back on track before anything else," he said, referring to a strict program of fiscal targets the country needs to meet under the conditions of the second bailout it received. "So the situation is quite difficult, it's not easy,” said the new finance minister who was attending his first Eurogroup meeting since last month’s election.
“I had a very friendly welcome yesterday. But don't be misled. These people will be very tough with us and I expect this. But we are determined to bring the economy back on track," he said.
Stuck between a rock and a hard place, Greece’s new government is being told to make more cuts before rescue funds are released, heightening uncertainty about when the crisis-hit economy will run out of cash and increasing pressure on prime minister Samaras and his coalition government.
Samaras faces significant opposition from the far left Syriza, which won almost half the vote in last month's elections.
“The bailout is a political and economic crime imposed on the country by the troika. You are not pro-Europeans, you are Merkelists - Berlin will lead Europe to dissolution,” said leftist leader Alexis Tsipras in a speech to parliament last week.
“They have turned the June 17 mandate for renegotiation and disengagement from the bailout into plans for its strictest implementation. They used the drachma as blackmail and they will pay. They betrayed the popular mandate and they will apologize,” said Tsipras.
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