The Greek situation is about to once again become a focal point as disagreements intensify between international creditors about coming to Greece’s rescue.
This Website Is For Financial Professionals Only
A report on just how big Greece’s shortfall is in the promised bailout program is due in October. All parties involved—the European Central Bank (ECB), the International Monetary Fund (IMF), and Greece’s own government—want to keep the euro intact.
By November, Greece will run out of money. So some type of plan has to be developed before then.
The most recent bailout offer is already behind schedule since the next installment of funds has been held back as Greece has been unable to make the mandated fiscal reforms. Meanwhile, the country is falling further into recession.
Greece’s prime minister Antonis Samaras has also been pushing the bailout coalition to grant the country two extra years to institute those reforms. Of course, granting that extra time means Greece will need additional funds.
Controversy is brewing because Germany, the Netherlands, and Finland refuse to give Greece more money. Other officials are looking to the ECB to either extend the duration of the Greek bonds that it currently holds or promise to make additional purchases when those bonds mature.
As well, the IMF could delay the repayments on the loans it has already granted Greece but the IMF board is growing increasingly unhappy with the existing exposure to Greek debt.
Whatever occurs, it appears that Greece will only end up owing more instead of reducing its debt and reforming its fiscal infrastructure as it was widely hoped the March bailout would enable it to do.
With pressure to focus on larger economies in distress, Europe is trying to keep the Greek problem from bubbling over in its effort to increase investor confidence
in Spain and Italy.
It is unclear how the ECB’s new commitment to open-ended bond buying would affect the Greek situation since it appears the push to institute the European Stability Mechanism was focused on stemming the contagion by rescuing the larger economies at risk.