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Published: Tue, February 14, 2017
Business | By Megan Pierce

Greek bailout delay could result in re-rerun of 2015, says governor

Greek bailout delay could result in re-rerun of 2015, says governor

On Friday, Eurogroup chief Jeroen Dijsselbloem said progress had been made in the Brussels talks with Greek Finance Minister Euclid Tsakalotos and other European Union and International Monetary Fund officials.

This leaves Tsipras in a hard position: he will either have to agree on painful measures, including a lower income tax-free threshold and pension cuts, even as his popularity has plunged; or call snap elections, campaigning against creditors' demands and refueling a popular backlash against the terms attached to the lifeline keeping Greece in the euro.

"Although we expect that the Greek government will implement the required measures, the risk of early elections is increasing given the rising political cost to the government and its slim majority in the parliament", Moody's Investors Service analyst Kathrin Muehlbronner said in a note to clients.

A deal would release another tranche of funds from this bailout, worth up to 86 billion euros, and facilitate Greece making a major 7.2 billion-euro debt repayment this summer.

Representatives of Greece's lenders are expected to return to Athens this week to report on whether Greece has complied with a second batch of reforms agreed under the current bailout, its third.

"For years, euro zone member states, including Germany, have shown active solidarity with Greece with the goal to bring this country to a path of sustainable finances and economic growth", German government spokesman Steffen Seibert told a regular government news conference. "That's why we want the aid programme to continue to be successful".

Some investors were anxious that a failure to reach a deal on what measures Athens needed to take to receive the next tranche of its third bailout programme before the next elections in various European countries might see it risk a default in summer. The higher the surplus and the longer it is kept the less is the need for any further debt relief to Greece.

The Commission forecast that Greek investment would triple to 12 percent of GDP this year and rise further to 14.2 percent of GDP next year as the economy expands 2.7 percent in 2017 and 3.1 percent in 2018 after years of recession.

Tsakalotos left Friday's meeting without a precise date set for the continuation of talks with bailout auditors.

Moscovici, who is considered an ally of the Greek government, said that all sides should avoid any needless instability, calling Greece a potential "success story".

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