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A Greek crisis primer

It is well known how Greece was shut out of the bond markets in 2010 following several years of profligate spending and deteriorating competitiveness. A hastily arranged bailout theoretically allowed for an orderly return to normalcy through the imposition of fiscal restraint and the adoption of measures to open up markets.

However, it was soon apparent that the optimistic scenario would not materialise. In the course of 2011 and during most of 2012 the Greek problem went into a critical phase as local political shortcomings and an economy ravaged by an unprecedented recession complicated matters. ‘Grexit’ became the subject of everyday discussion. Companies started reviewing their exposure to this possibility and developing potential reaction measures ranging from the simplest – moving their cash reserves outside of the Greek banking system – to the more elaborate, such as introducing changes in their agreements and other legal texts that could anticipate potential future developments.

The PSI and a new government in the summer of 2012 restored some optimism. The four systemic banks were successfully recapitalised, cooperation between Greece and the international lenders improved, and there was even some limited – in early 2014 – return to the market via the issuance of short-term debt. This was the period of ‘Grecovery’, based on budgetary discipline and the hope that there will be an end to the six-year recession.

However, as the events of the last months have shown the positive developments were not based on solid ground. Structural reforms in the economy mostly stalled. Deflation has set in. Exports are stagnant. And then, the ever present political problems : it has proven impossible to escape the reality imposed by the fact that the parties that have governed Greece in the past thirty years and are responsible for the crisis, were at the same time attempting to resolve it. Hence, Greece currently finds itself with a new government, one set to address the problems under an entirely different light. Only time will show whether this new approach has merit and can contribute to a solution.

We at Souriadakis Tsibris are committed to providing our clients with the legal support required to navigate through these difficult times and protect their interests in Greece.

In case you need additional information about our business law, capital markets and Eurozone crisis record and capabilities, or current related legal developments, please contact Michael Tsibris at  mtsibris@souriadakistsibris.gr .

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