After word came from the recently elected government that Greece would be paying back its bondholders in a timely manner, analysts now have fears that this is unlikely and that the economy is slowly slipping back into recession territory.
Worries stem from the upcoming payments due on major IMF loans that watchers have a hard time believing the government can honor. This is in conjunction with the anti-European interventionist rhetoric that allowed the current left-wing government to gain power. The question of whether or not Greece will enact major economic and structural reforms requested by the IMF and European Union remains to be seen. However, the slowness of not only implementing them, but also laying out even a timeline to do so has drastically exacerbated fears that another default and recession are coming.
The major reason why analysts believe Greece may head back into recession is largely due to the political uncertainty described above. This likely leads to distrust among investors in the long-term prospects of the country, thereby harming capital formation and expansion. This, combined with the previous recession stemming from 2008 that wiped out a good fraction of the country’s GDP, has made Greece an unlikely candidate for domestic and foreign investment.
With major officials claiming that July is the latest the government can remain solvent with the current state of affairs, the world continues to wait as European and Greek leaders get the house in order and finally move on the from the crisis that began almost seven years ago.
-- Rushi Patel