Disappointment spreads over lack of Greece deal
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Disappointment spreads over lack of Greece deal

However, will European leaders be able to seal a deal by the end of Davos? And will it be enough to save the country that is already severely behind on the first set of imbursements.

Over the last week, even the most pessimistic of people thought that Greece and European leaders would seal a deal to secure its much needed bailout money.

Not only does Greece need to receive its second round of emergency fundingto stop itself defaulting on its crippling sovereign debt, but the urgency for it to even receive its previously agreed, yet delayed payments means that it is already severely behind on receiving its first load of cash.

Back on 5 January this year, Euromoney reported that:

The next €5 billion tranche for Greece that was originally scheduled to be paid in December 2011 is now to be paid out in March 2012, Commission spokesman Olivier Bailly said.

A further €10 billion euros that Greece was originally to receive in March this year will now be paid only in June and all of those sums can also be delayed if inspectors judge Athens is failing to deliver promised fiscal reforms.

"That cannot be changed," Bailly said, referring to the three-month rhythm in paying out tranches of the first Greek rescue programme.

This is a major concern, considering Greece has repeatedly cried out that the country faces the risk of defaulting, if the European Union (EU) and the International Monetary Fund (IMF) did not pay out scheduled tranches.

These payouts are part of the aid that was promised under a €110 billion joint EU/IMF financing programme in 2010 in exchange for fiscal austerity and structural reforms. While, €73 billion has already been paid out, there is currently a €37 billion chunk that remains to be disbursed.

However, Greece of course hasn't really helped itselfwith adhering to the initial plan of fiscal measures to be undertaken, after it failed to sign a deal that includes wage cuts for public sector workers to 60%, 30,000 public sector workers to be suspended, a new pay and promotion system for 700,000 civil servants to be installed, while pensions and lump-sum retirement pay were to be cut alongside higher retirement ages and a lowering of the tax-free threshold to €5,000 a year.

Despite this, however, markets have been waiting tentatively for a deal, especially when the Greek government spokesman, said on national TV at the beginning of this yearthat:

"The bailout agreement needs to be signed, otherwise we will be out of the markets, out of the euro."

Banks and companies have been preparing their systems for Greece exiting the Euro, while many others seemed to have resigned themselves to the fact that an exit is inevitable.

However, there may be a glimmer of hope as Charles Dallara, the managing director of the lobby grouprepresenting creditors negotiating with Greece, the Institute of Institutional Finance (IIF) said over the weekend that "he was hopeful of an agreement on a debt-swap needed to lower the country’s borrowings."

This week is crunch time. 

- Euromoney Skew Blog

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