Cyprus-based foreign exchange trader IronFX warns that Greece’s promised debt payment to the International Monetary Fund on April 9 and domestic social spending planned for this month may send the country’s economy back into recession.
Greek Finance Minister Yanis Varoufakis on April 5 confirmed to IMF managing director Christine Lagarde that Athens would go ahead with its regular 458m-euro debt payment to the Fund on April 9.
This is a “huge concession” on the part of the government of Prime Minister Alexis Tsipras, “which came into office with a pledge to renegotiate all such agreements”, IronFX said in a research piece.
Next month another big hurdle comes – Greece is scheduled to pay the IMF 963m euros.
At the same time, the Limassol-headquartered company says, “better-than-expected tax collection, postponing some budget expenditures and borrowing from some state entities” enabled the government to meet all its salary and social security payment commitments last month.
The firm argues that, if tax revenues remain on track and government entities continue to lend to the state, Greece may be able to meet its obligations to creditors, which reach almost 1bn euros, this month too.
However, all this threatens Greece with a new recession, IronFX says.
Real GDP contracted in the fourth quarter of 2014 and may well have shrunk again in the first three months of 2015. The Greek government would have a job trying to raise more in taxes from an economy in recession, the company says.
The market will meanwhile be waiting for Tsipras’s planned meeting with Russian President Vladimir Putin during a visit to Moscow on April 8-9. However, given Russia’s own financial problems, the meeting is unlikely to get Greece too far, IronFX argues.
“So far, the Greek government seems to be favouring its creditors over its voters, which should keep the markets happy,” IronFX sums up.