October 4, 2011

Euro zone delay decision for next Greek financial instalment

by Kay Mitchell

European stock markets lost ground this morning after it emerged that euro zone finance ministers have postponed the approval of Greece’s next instalment of its bailout loan.

A meeting was scheduled for October 13, at which time finance ministers were expected to approve the next tranche but this has now been cancelled.

London’s FTSE was down by 2.4%,, while France’s CAC fell 3.3% and Germany’s DAX lost 3.2%.

Meanwhile, the decision comes after crisis-torn Greece said it will not meet its deficit target this year.

Greece has introduced harsh austerity measures to reduce its budget deficit but this has led to several strikes and protests – some which have been violent.

The measures have also impacted negatively on growth and the economy is likely to shrink further, according to analysts.

However, the Greek Government has previously said the unpopular measures are essential and will have to be adhered to.

Greece’s economy is expected to contract by 5.5% this year – much worse than the 3.8% estimate in May – the country blamed this for its failure to meet its deficit targets.

The country showed a deficit of 8.5% of gross domestic product for this year – missing targets of 7.6%.

Greece may now not receive its next instalment of €8 billion until November but finance minister, Evangelos Venizelos, said that should not cause any problems as the Greek Government had no funding issues until November.

Greece had previously said it needed the funds by the middle of this month to avoid it going bankrupt in November.

Bankruptcy would put immense pressure on the euro zone and could have a serious knock-on effect on the global economy.

Inspectors from the International Monetary Fund (IMF), European Union (EU) and European Central Bank are currently in Athens investigating the country’s financial position.

In other news today, figures today revealed the impact of Greece’s tough austerity measures had on household spending.

Retail sales fell 4.3% in July on an annual basis – however, this was not as bad as the 11.4% fall in the previous month.

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