Relief From Greek Election Likely to be Fleeting

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The previous government said the government would run out of money July 20 if more funds are not received. Greece's economy is teetering over the abyss, with businesses struggling to pay suppliers and depositors steadily pulling money out of already troubled banks. The shrinking economy lowers tax receipts and makes the debt burden larger by comparison.

European finances ministers said the "troika" officials from the European Union's executive commission, the IMF and the European Central Bank will visit Athens as soon as a government is formed "to exchange views with the new government on the way forward."

Germany's Foreign Minister Guido Westerwelle said late Sunday that Greece had to implement all agreed reforms but that "I can well imagine talking again about timelines."

The country was originally supposed to identify €11.5 billion in budget cuts for the next two years year by the end of this month. That deadline has probably slipped, and the new government may seek to make the cuts over a longer period.

However, many analysts think Greece may still wind up leaving the euro, either to improve its economy's competitiveness through introducing a weaker currency, or because it may needs to print its own money to bailout banks or pay salaries.

Meanwhile, Europe's governments are struggling to agree on measures to put new foundation under the euro. Without agreement on bold new steps, a June 28-29 summit of European leaders may fall short of expectations and lead to even more market tension — as such several such summits have typically done in the past.

"Lending money is all about confidence, and that is shot to bits right now," said Gary Jenkins, managing director of the Swordfish Research Ltd.

There are also concerns that because Greece has agreed to stick with the bailout, this might alleviate pressure on politicians to act quickly. Expectations for a substantial response from governments are high for a summit gathering of European leaders such as Germany's Chancellor Angela Merkel and France's President Francois Hollande next week.

European leaders have conceded the euro's foundations were flawed when it was introduced in 1999. Rules against big deficits failed to keep governments from running up too much debt through overspending, as in Greece, or needing to bail out banks, as in Ireland and Spain. Proposals could include some form of common borrowing, tighter central EU control of individual countries' spending and debt, and centralized supervision and bailouts of weak banks.

Yet all proposals are controversial because they involve countries giving up authority over their finances, and Germany, the biggest eurozone member and in relatively good shape, opposed to being put on the hook for other people's debts.


McHugh contributed from Frankfurt, Germany.

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