Greek economy grew 0.8% in Q2, averted recession in Q1

Is the worldwide Monetary Fund on board? The first tranche of bailout funds will flow to Greece once its fellow eurozone nations agree. At this stage it is unclear. We still need to talk with each other on a few issues. Greece will only avoid the threat of “Grexit” if some of its borrowing is written off, said Robert Peston on the BBC.

Growth should then return, running at 2.7 percent in 2017 and 3.1 percent in 2018.

He said: “The Greek finance minister… says more or less the same thing”.

Separately, EU sources said Greece will tumble back into deep recession this year.

European institutions voiced “serious concerns” about Greece’s ability to repay its debt, putting pressure on Germany as the main creditor to offer debt relief as part of the next aid program, documents show. Negotiations in the past have been heated, but all sides are reporting progress this time around.

Germany, who was the largest single contributor to Greece’s two previous bailouts, has been the country’s harshest critic and has maintained a cautious stance.

The draft bill for the three-year rescue package worth about 85 billion euros ($93 billion) in loans includes harsh spending cuts and tax hikes that Prime Minister Alexis Tsipras has said he has no option but to implement.

The deal, which must be approved by the German parliament next week, will see Greece aim for looser fiscal targets than the creditors first wanted. In addition, officials from the finance ministries of the 28 European Union member states planned to talk by phone Wednesday evening on the bailout plan. Crucial to success could be the outcome of a consultation on how to proceed with privatisations and an agreement to phase out early retirement, which have long been sticking points.

The deal will “unravel” before the three years are up.

Under the baseline scenario Greek authorities have agreed with worldwide creditors in the new bailout agreement, Greece’s economy is projected to shrink by 2.1 to 2.3 percent this year.

These capital controls are thought to have hampered business activity and it is expected that these controls will have constrained economic growth in the third quarter.

There is also a chance the appetite for austerity could fade among a population which has already rejected the bailout terms at a referendum.

Greece was forced to shut down its banks for most of July after ECB had frozen liquidity assistance with daily withdrawals limited to €60 per day.

With Greece’s economic crisis still raging, prominent voices, ranging from Nobel laureate economists like Paul Krugman to officials like US Secretary of the Treasury Jack Lew, are calling for more lenient bailout terms and debt relief.

The Greek parliament will vote on over 50 measures on Thursday and is prepared to authorize – despite the queasiness of Syriza MPs – pension reform that eliminates privatizations and collective bargaining.