Greek Prime Minister Alexis Tsipras heads into meetings with creditors with a fresh democratic mandate from the people of Greece. The stakes are high and the nation's problems vast. Here's some of what needs fixing in six charts:
The International Monetary Fund is willing to countenance debt relief; the Eurogroup is not. The IMF's Chief Economist Olivier Blanchard neatly summarizes the impasse between Greece and its official creditors here. The dotted line on the chart below shows the latest GDP forecasts — these are likely to deteriorate.
The end of 2014 brought with it a foreboding sign: the unemployment rate ticking up in the two groups between the ages of 20 to 29. Since the government's public wranglings with creditors, the jobless figures may have risen further, fueling the potential for civil unrest.
As the Greece crisis escalated, European Central Bank President Mario Draghi has tried to stay politically neutral; without a surge in contagion — which seems remote — or a resolution between Greece and its creditors, Draghi is unlikely to ride to the rescue.
The imposition of capital controls was well signaled and many took notice, converting their bank deposits to cash. The capital controls could be a first step to a new currency. (Click here for details on the cash calculation used in the chart below.)
Greece is a relatively closed economy. This means a sharp devaluation would immediately make all Greeks worse off as the cost of imports soars. "Devaluation would lift competitiveness but, with a relatively small exporting sector, the Greek economy would not be in a good place to benefit from that," said Jamie Murray, chief EMEA economist at Bloomberg Intelligence. "It will take time for resources to shift toward more outward-looking activities."
Target2, a transfer payment system for euro-area central banks,
illustrates the large imbalances within the region. According to an article
by Paul De Grauwe and Yuemei Ji back in 2012, Target2 "claims are just a
repackaging of risks that Germany took by accumulating large current
account surpluses." In the event of a break-up of the euro area,
"Germany would lose massively." https://www.mql5.com/en/signals/111434
