One Greek Nightmare May End Next Week, Just As Another Begins


Greece may be close to the end of its long, national, austerity nightmare with the IMF set to make a decision on its next bailout tranche next week.

Eurogroup president Jean-Claude Juncker says that it is possible the IMF will say no, and leave Greece without the cash to carry on. It will be be left to beg Europe for even more bailout funds from its coffers.

The problem is that there’s growing sentiment amongst the public, and politicians, in Europe that Greece will never get out of their current financial crisis without debt restructuring. However, if Greece does restructure (or reprofile) its sovereign debt, it could mean the end of ECB support for the country’s banks. As a result, the whole economy could come crashing down overnight.

The ECB is doing its best to prevent a restructuring or reprofiling. It has a lot of Greek debt on its books as collateral, and the costs could be high for the institution. It may even be overstating its case, to prevent a restructuring event.

But, if the IMF refuses to give Greece more cash, and if European leaders also refuse, a restructuring, or reprofiling, looks likely. In that scenario, if all the doom and gloom (sturm and drang) of the ECB comes true, Greece may have to flee the euro just to survive.

So, while an IMF “no” might end one part of the Greek nightmare, it’s likely to awaken the potential for another.

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