Greece in Major Turmoil as Banks Refuse to Help

Greece close to exiting the Euro

Prolonged electoral uncertainty has put Greece into a state of deep freeze, meaning whoever finally emerges as the new leader will take over a country already falling behind on its promises to lenders.

The European Union and International Monetary Fund demanded extensive cuts and reforms as part of a 130 billion euro bailout package agreed in March.

But Greece has had no elected government since an inconclusive election on May 6, and paralysis will continue for at least another month, even as funds dry up in the treasury.

Senior judge Panagiotis Pikrammenos was sworn in as interim prime minister on Wednesday, but he will not be empowered to take any political decisions – only to steer the country to a new vote on June 17.

“The only thing we are doing is waiting,” said a government official who declined to be named.

Another Greek official close to bailout negotiations said ministers in the outgoing cabinet have not been authorised to negotiate with Greece’s lenders since the May 6 election. A senior party official said the caretaker government would not publish any decrees and all tender procedures were suspended.

Leftists now favoured to win the next election have alarmed Europe by threatening to tear up the bailout altogether. But even if the next Greek government wants to keep to the agreement, it will have catching up to do from day one.

A privatisation programme already many times cut back has been suspended, a multi-billion euro spending cuts plan is far from being ready, tax collection continues to be weak and a bank recapitalisation plan is in limbo.

One consequence already became clearer on Wednesday: sources at the European Central Bank said it had withheld liquidity for some Greek banks because the bank recapitalisation plan had not yet been successfully implemented.

Even before the May 6 election, many reforms were put on the backburner to avoid antagonising voters, officials involved in bailout talks say. These include a plan to slash spending by over 11.5 billion euros in 2013-2014, which Greece must agree by late June to meet a key bailout target.

Read more at Reuters….

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