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International Monetary Fund

Reform frustration rattles euro zone

Tuesday, Jul 02, 2013 - 02:08

July 2 - Three days to deliver or face the consequences - that's the warning given to Greece as it tries to secure its latest bailout payment. Coming after the resignation of Portugal's Finance Minister and political problems in Italy Sonia Legg asks if the debt crisis could be about to re-ignite?

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Gone are the days when one bit of euro zone bad news sends investors running for the door. But what about three bits in one day - affecting Greece, Portugal and Italy? Berenberg's Banks' Christian Schulz. (SOUNDBITE) (English): CHRISTIAN SCHULZ, SENIOR ECONOMIST, BERENBERG BANK, SAYING: "The systemic component is largely gone but we do remain nervous about each individual country and political accidents happening there." The troika is looking at Greece's progress before handing over the next bailout instalment. EU officials have told Reuters it has just three days to reassure lenders it can deliver on previous promises. (SOUNDBITE) (English): CHRISTIAN SCHULZ, SENIOR ECONOMIST, BERENBERG BANK, SAYING: "The Greek coalition seems stable enough, even after it has become a little smaller because of the defection of one party, to see through even tougher votes in parliament and continue with the reforms. But also on the side of the troika there's more willingness to be flexible on Greece since it demonstrated last year that it wants to stay in the euro." But what about the euro zone's poster boy - Portugal. Finance Minister Vitor Gaspar has just resigned citing lack of support for his reforms. He was the architect of the country's austerity drive - his demise could hinder the country's exit from the rescue programme (SOUNDBITE) (English): CHRISTIAN SCHULZ, SENIOR ECONOMIST, BERENBERG BANK, SAYING: "It looks to me as though somebody has been made a scapegoat here. Overall Portugal is progressing but the benefits of the reforms are not really helping the people to support the government more than they have in the past." Portuguese bonds weakened following the resignation and opposition parties began circling. (SOUNDBITE) (Portuguese) SOCIALIST SPOKESPERSON JOAO RIBEIRO, SAYING: "The country needs a new government. A new government that balances public accounts through growth and jobs and unites the Portuguese rather than dividing them." In Italy it was recession frustration rather than austerity fatigue which increased tension. One coalition partner threatened to withdraw over the slow pace of reform. But Italian politics are traditionally complicated and meetings are planned to tackle the crisis. For now that's enough - but too many more political banana skins could prove damaging.

Reform frustration rattles euro zone

Tuesday, Jul 02, 2013 - 02:08

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