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Monday, January 21, 2013

Greece is not out of woods yet.

Whether to bail out Greece or not was a big question for European policy makers. Since the country was reeling under debt with no structured plan to reduce the same euro zone partners were apprehensive in lending out support. However, leaving Greece alone to fend for itself would have created further trouble. On the other hand, lending money for bail out was also not feasible (for the fear of no recovery) as there were lack of reforms and no strict austerity measures. Despite that, Greece has received billions of dollars as bail out from the member nations. That's because if no help was extended then Greece would have had to exit Euro Zone. And this could have had serious repercussions on other member nations. But it seems that bail out which continued for long requires further doses of additional liquidity.

Recently, International Monetary Fund (IMF) estimated that Greece would face a financing gap between 5.5 bn to 9.5 bn Euros in 2015 and 2016. And this gap is most likely to be filled by the member nations. Other help is also extended in the form of lowering interest rates on the loans already given out. The Greek debt buyback program is also being considered. Thus, while EU is taking all the steps to extend support to the ailing country it remains to be seen whether the Greek government is able to re-install fiscal sanity in years to come. If not, the trouble may deepen further.      

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