Ambrose Evand-Pritchard sheds some insight into the 180-turn that’s happened in Greece over the last 24-48 hours.
There’s really two things.
The first is that European leaders have grown skittish for political reasons about bailing out Greece or even saying they support Greece.
The second thing has to do with hard maths:
Is this now a dispute about the price of any loan? Or are the Greeks so angry over the barrage of insults they have been receiving daily that they would almost relish a chance to give Brussels a black eye in revenge?
The Eurogroup has suggested that any rescue would come at a punitive rate above EU borrowing costs, but did not specify. Perhaps it would be around 4.5pc to 5pc for long-term money.
Sources tell us that the IMF would lend at around 3.25pc, using its SDR benchmark plus 100 basis points. So why suffer the daily abuse from Europe?
Besides, as Mr Papandreou himself said, the IMF “would have asked us for nothing more,” meaning it would not impose more severe austerity measures than the EU is already imposing. It would be lunacy to do so. Greece is already having to squeeze fiscal policy by 10pc of GDP in three years — and a lot more if Deutsche Bank is right in predicting economic contraction of 4pc this year. If you think through the arithmetic, this could soon turn into a self-defeating downward spiral.
Bottom line: IMF money is cheaper than euro money. So why not take that?
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