Greece Falls Back Into Recession, Bailout Payments Questionable

Greece has notoriously struggled economically since the global economy declined in 2008. To get struggling European nations back on their feet, the European Central Bank created a bailout program, which Greece eagerly accepted. Unfortunately, as each payment has loomed, Greece has struggled to make repayment. Now, a report of Greece’s first quarter economic performance indicates that it fell back into recession, adding pressure to the struggling nation to reach an agreement with its creditors over its upcoming bailout payments.

Greece has notoriously struggled economically since the global economy declined in 2008. To get struggling European nations back on their feet, the European Central Bank created a bailout program, which Greece eagerly accepted. Unfortunately, as each payment has loomed, Greece has struggled to make repayment. Now, a report of Greece’s first quarter economic performance indicates that it fell back into recession, adding pressure to the struggling nation to reach an agreement with its creditors over its upcoming bailout payments.

According to a report by Bloomberg and statistics provided by the European Union’s statistics office in Luxembourg, Greece’s gross domestic product contracted by 0.2 percent in the three months of 2015. This contraction followed an earlier such decline in the previous quarter of 0.4 percent. While not disastrous, statistics that are more recent indicate a more rapid decline since March according to Michael Michaelides, fixed-income strategist for the Royal Bank of Scotland Group PLC in London.

Unfortunately, the contracting economy will make measure required of Greece by its creditors to be even more far-reaching. However, Greece has struggled to come to agreements over terms already set out by its creditors, so further burdens will likely create further impasses and greater strain on the economy. According to the International Monetary Fund, Greece will need to raise at least $3.4 billion to meet its minimum budget targets acceptable to its creditors. While Greece has enough money to make it for a few weeks, according to Finance Minister Yanis Varoufakis, long term prospects appear much bleaker. Greece has had to draw on holding accounts and municipal coffers to pay back previous loan payments and salaries and pensions of state employees.

Greece has asked for an additional Euro group meeting before the end of May in order to access additional funds to help with its cash crunch. However, reaching an agreement may be difficult given Greece’s inability to meet the budget requirements made by the IMF. The retirement age, cuts to government pensions, privatizations, and a desire to reinstate collective bargaining restrictions have all been obstacles to reaching an agreement with Greece’s creditors.

The Greek economy had been expanding through most of 2014, growing by about 0.8 percent after six years of consistent contraction that destroyed nearly 25 percent of the nation’s economic output. However, after the first quarter numbers became known, the European Commission reduced its forecast for Greek GDP growth for 2015 from 2.5 percent to a scant 0.5 percent.