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Germany will back Greece for now

Thursday, February 26, 2015 - 01:54

Greece says it will struggle to make debt repayments to the IMF and ECB this year. But as Grace Pascoe reports another obstacle does look like it will be overcome - German lawmakers have signalled they will approve an extension of Greece's bailout.

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Behind the smiles the Greek Finance Minister is worried. He fears Athens will struggle to repay its debts to the EU and IMF this year. The Central Bank governor is nervous too. Yannis Stournaras says this year's expected growth is at risk if the government can't deal with creditors, reforms stall and public finances worsen. (SOUNDBITE) (Greek) GREEK CENTRAL BANK GOVERNOR YANNIS STOURNARAS SAYING: "In order to take advantage of this window of opportunity negotiations with partners must continue in a spirit of cooperation and trust in order to reach a mutually beneficial final solution soon." He accepts a bigger disaster - a banking collapse - was narrowly averted by last week's agreement of a four-month bailout extension. SOUNDBITE (GREEK) GOVERNOR OF THE BANK OF GREECE, YANNIS STOURNARAS, SAYING: "The banks, after the recent increase in capital, have a sufficient capital base, but the pressures that liquidity is facing, particularly in the last months, remain strong." Germany also has doubts about the credibility of Athens' latest reform commitments. But they are set to approve Greece's aid plan, says the leader of the German parliament Volker Kauder. (SOUNDBITE) (German) LEADER OF MERKEL'S CONSERVATIVES IN PARLIAMENT, VOLKER KAUDER, SAYING: "We are taking decisions which are necessary in the interest of Germany and of Europe. Therefore, we will vote yes on Friday." Even that won't be the end of the negotiations over the reform plan. It will now be scrutinized over the next two months. Rabobank's Jane Foley isn't surprised cracks are appearing. SOUNDBITE (English) RABOBANK SENIOR CURRENCY STRATEGIST, SAYING: "I think there has been warnings that Greece is going to have difficulty paying back its debts for some years and probably for some years to come this will continue." Greece returned to growth last year after a six-year recession that left one in four unemployed. The central bank is still predicting the economy will grow again this year, with the recovery picking up next year. But unlike the government it's not making any promises.

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Germany will back Greece for now

Thursday, February 26, 2015 - 01:54