Pushing the new bailout back for several weeks underlines the amount of distrust that has built up against Greece over the past two years, when many promised cuts and reforms were passed in its Parliament but never actually implemented.
But it also means that Greece, its citizens, and the rest of the world economy won’t know for several weeks whether the country can avoid a potentially disastrous default. A bankruptcy could force Greece out of Europe’s euro currency union, drag down other troubled eurozone countries and further roil global markets.
The uncertainty over European Union financial reforms and the region’s weak economic outlook led the rating agency Moody’s Investor Service to downgrade its credit ratings on Italy, Portugal and Spain, while lowering the outlook for its ratings on France, Britain and Austria to “negative’’ from “stable.’’ Moody’s also cut its ratings on the smaller nations of Slovakia, Slovenia and Malta.
“Germany is trying to get the best deal it can by putting pressure on Greece now,’’ said Ben May, European economist at Capital Economics in London. The idea is to “give Greece a bit more of an incentive over the next few weeks to speed things up and get things moving.’’
But delaying the final approval of the bailout is not without risk. Uncertainty over the new rescue money could dissuade some of Greece’s private investors from participating in a separate bond swap deal, May warned. A hitch in getting the bailout package through national parliaments in the eurozone could also push Greece perilously close to missing a euro14.5 billion bond redemption on March 20, he added.
German Finance Minister Wolfgang Schaeuble stressed that Europe was doing everything to help Greece avoid bankruptcy, “but Greece itself of course must want that.’’ He told German public broadcaster ZDF that if Greece were to default on its debt, Europe “is better prepared now than two years ago.’’
