Greece Running Out of Cash; Government Under Threat

Greece’s downward spiral has come to the top of the euro zone agenda again, with economists and analysts warning that it is closer than ever to running out of cash, and that the survival of a coalition government brought in just five months ago is under threat.

“Greece is running out of cash.The current strategy is really not working and there is substantial political risk,” Thanos Vamvakidis, head of European G10 currency strategy at Bank of America Merrill Lynch, told CNBC Thursday.

Greece’s economy has disappointed on every key metric – growth, unemployment and debt reduction - since the initial bailout terms were agreed. Its debt-to-GDP ratio, already the highest in the euro zone, will reach 189 percent, rather than 179 percent, Finance Minister Yannis Stournaras announced Wednesday.

This means that the targets agreed as part of the bailout are based on over-optimistic forecasts. The country’s privatization program is also not proceeding as quickly as hoped.

Greece’s government also wants the deadline for its primary surplus to reach 4.5 percent to be extended by two years, to 2016.

“Greece is likely to receive its next disbursement of aid only because it's in everybody's interest to keep Greece ticking over until the next review. This is "muddling through" in its purest form,” Nicholas Spiro, managing director at Spiro Sovereign Strategy, warned.

The Hellenic country is facing a yawning 40 billion euros ($51.7 billion) “funding gap” if the extension is granted, analysts at Credit Suisse warned. 

Read more: http://www.cnbc.com/id/49606194