THIS is what could push Greece out of the euro

Holly Ellyatt   | @HollyEllyatt

22 Hours Ago

The pressure of thousands of migrants is piling on the pressure on a Greece struggling with a stagnant economy, rising social tensions and political pressure and could push the country back towards an exit from the euro zone, analysts Eurasia Group have warned.

Europe has been left reeling from the influx of migrants heading to the region, most of whom are fleeing civil war in Syria in the Middle East. However, Greece is struggling more than others as it and Turkey have become the first port of call for the migrants.

While European leaders have struck a 3 billion euro ($3.35 billion) deal with Turkey to reduce the number of refugee flows, pressure is growing for European Union leaders to do even more to control the numbers of arrivals.

Analysts at Eurasia Group said in a note on Monday that Greece could bear the brunt of potential plans to limit the amount of refugees reaching northern Europe.

"We continue to believe that the EU-Turkey deal is not going to deliver the reduction in refugee flows the Europeans are hoping for," analysts Mujtaba Rahman, Naz Masraff and James Sawyer from Eurasia Group said in a note Monday.

"This will continue to mount pressure on German Chancellor Angela Merkel, who, rather than conceding to a domestic ceiling, may instead opt to temporarily contain the problem in Greece" by sealing the Greek-Macedonian and potentially the Greek-Bulgarian border too.

They warned that if this border was sealed, however, the results could be socially and economically dangerous for Greece, prompting more social unrest, instability and could even push Greece back towards an exit from the euro zone. Since prime minister Alexis Tsipras' government reluctantly signed a third bailout deal with international lenders last summer, it has been subject to a new round of harsh rules and reviews.

"Sealing the Greek-Macedonian border will strengthen anti-European and nationalist sentiment in Greece and make early elections more probable; these could undermine completion of the first review and in a worst case scenario, reintroduce the risk of Greece's exit from the euro," Rahman, Masraff and Sawyer believed.

Pressure on Greece

As a coastal nation, Greece has been the main draw of thousands of migrants who have risked their lives to reach Europe to escape persecution and war in the Middle East. In 2015, over 1 million migrants arrived in Europe with the majority arriving by sea, according to data from the International Organization for Migration (IOM).

Since the start of 2016, the numbers have not abated with over 75,000 having arrived in Europe by both land and sea. Already this year 374 migrants are known to have drowned or are missing.

To give an idea of the pressure Greece's authorities are under, between 28 January and 3 February, 16,723 migrants and refugees arrived in the country alone. Since January 2015, the IOM and national authorities say that 927,386 people have arrived in Greece.

Recognizing that Greece was crucial in the migrant crisis, European leaders pledge to help the country by creating more migrant reception centers –called "hotspots" -- where migrants are registered, fingerprinted and most of whom enter the relocation scheme. The re-locating of migrants is meant to be shared among EU nations to relieve the burden on Greece, and other arrival points such as Italy.

Eurasia Group was not sure Greece had done enough, saying that: "Over the next several months therefore, Greece is going to have to demonstrate compliance with a number of EU demands to improve its border management (staffing, verifying and stamping passports, building five 'hotspots' and two 'relocation centers')."

But many in Greece, including the government, feel that Europe is not helping – particularly at a time when Greece is facing a contraction in GDP in 2016, according to the European Commission's latest forecasts, and being forced to cut spending and introduce unpopular reforms as required by lenders.

Eurasia Group's experts believed that while the country could probably meet its financial obligations in February and March, and could complete its first bailout review in July (which would release more cash), Greece was in a precarious position.

"Even if the government can survive financially in a narrow sense, a rapidly deteriorating political and social domestic context, driven by external factors, could re-introduce another back-to-the-wall crisis negotiation. This would promote uncertainty regarding reforms, as it would once again bring to the fore the risk of destabilizing scenarios such as elections and/or a change in the makeup of the Greek government."

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