Athens braces for Brexit impact

25 June 2016
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Prime Minister Alexis Tsipras spoke with French President Francois Hollande on Saturday as the Greek government started to gauge the mood within the eurozone in the wake of the United Kingdom voting to leave the European Union, a result which Athens fears will make its life more difficult in the months ahead.

Greek government sources said that Tsipras and Hollande discussed the “need to re-establish the principles of democracy, social welfare and solidarity” in the EU after 52 percent of Britons voted to leave the Union.

There is concern within the coalition about Brexit having a negative political and economic impact on Greece.

Among the fears expressed by Tsipras’s aides is that some member-states might prefer to work toward a two-speed Europe, leaving countries like Greece lagging behind. This might also involve the member-states trying to take on greater authority in the decision-making process and sidelining the European Commission to some extent. Athens sees this as a negative development because it would complicate efforts to reach an agreement on restructuring Greek debt.

There is also concern about what impact a potential economic downturn in the eurozone could have on Greece’s weak economy. Greek authorities believe that the impact will be relatively small and that the tourism sector will not see a particularly adverse effect. Greece welcomed 2.4 million visitors from the UK in 2015, making it the second largest market for the country, but there is some concern that the declining value of the pound may lead to this number falling.

There are hopes in Athens that the economic instability Brexit is expected to create might encourage the European Central Bank to bring forward its decision to grant Greece eligibility for its quantitative easing program. The ECB said last week it would issue such a verdict once it has conducted its own debt sustainability analysis. This is not expected to be completed before November.

Sources suggested that there is no prospect of this process being speeded up and that in the current climate there is no appetite for increasing the ECB’s exposure to Greece unless the appropriate steps have been completed.

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