German Chancellor Angela Merkel and European Council President Herman Van Rompuy are meeting tonight to discuss the crisis in Greece, according to Expansion.
The meeting will not be followed by a statement or press conference.
It comes just 3 days before European finance ministers are expected to sign off on a bailout for Portugal. Earlier today, it was rumoured that a plan for Greece would be on the table in 10 days time. EU, IMF, and ECB leaders are currently in Athens reviewing the country’s progress toward achieving debt goals.
Chancellor Merkel is under increasing domestic pressure regarding the future of Greece and the eurozone, with Der Spiegel calling on her to take up her role as chief leader in Europe and defend the European project. There’s no clear indication she’s willing to accept that responsibility, with right wing political pressure growing in the country.
Germany’s finance minister, Wolfgang Schaeuble, wants more austerity out of Greece for more money. Officials in the Netherlands are also sceptical of giving Greece more cash. And while the True Finns may not be part of the new Finnish government, there’s no guarantee political leaders there will be keen to write another cheque.
While we’re likely to see a conclusion to the Portuguese crisis on Monday, and perhaps an interest rate cut for the bailed-out Irish, the Greece crisis should roll on. As we said before, this round of crisis resolution should just kick the can further down the road anyway.
But what if the end of that road is 2 months from now, not 2 years? Joseph Cotterill at FT Alphaville points out that 2-months before Argentina spiraled out of control in 2001, it received a second support loan from the IMF. While the situations aren’t exactly alike, it could serve as a warning to speed up the process of Greek debt restructuring.
From FT Alphaville:
Now, Greece is probably getting its own second loan – right on time, it appears. (The money keeps rolling in…)
The point is, it (hopefully) won’t collapse in a disorderly default just two months later, like the Argentine government did. Unlike 2001′s IMF officials, even the dolts in Frankfurt will drop the austerity act and see that Greek yields are already higher than Argentina’s even after its May 2001 maturity swap. There is still space to allow an interim restructuring (for example, Roubini’s proposals) accordingly. Indeed surely the risk facing Greek bank capital argues for a restructuring before that risk gets worse.
Note the similarities between the two, and then Argentina’s abrupt yield spike after its second bailout:
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