La Greece remedy in extremis to uncertainties of the Eurogroup, but remains at the mercy of the differences between the EU and the IMF. Today Greek bonds for 5 billion euros are expiring and in recent days the fear of bankruptcy had spread. But Athens has found a way to survive: “There is the necessary money“, guaranteed a source from the Public Debt Agency.
Most of the bonds will be repaid thanks to the proceeds of a new placement. Three days ago the Greek Treasury has placed 1 and 3-month bonds on the market, raising around 4 billion euros. A shot in the arm paid dearly, given that interest rates have reached 4%. As expected, it was mainly Greek banks that bought the bonds.
At least for now, therefore, default is averted. However, the fate of Athens remains in the hands of international creditors, who must find an agreement to give the green light to the next tranche of aid worth 31 billion euros. Without those funds, the country will soon come to terms with the risk of insolvency.
Unfortunately for the Greeks, news has emerged in recent days divisions between the European Union and the International Monetary Fund. Brussels (with Berlin in the front row) wants to avoid a further one at all costs write-down of the Greek debt, while the IMF is decidedly oriented towards this solution. After the restructuring at the beginning of the year of the quota in private portfolios, this time it would be a question of intervening on the securities held by institutional investors (ie governments). However, there are strong doubts about the legitimacy of the operation under the provisions of the European treaties.
The Union would prefer waive part of the interest on the funds disbursed, but on this front it is the IMF that opposes it with the utmost determination. Furthermore, yesterday the Fund reiterated that it intends to continue with the aid plan only if the public debt is reduced to 120% of GDP by 2020. Sustainability must remain the first objective. According to the forecasts of the Government of Antonis Samaras, however, next year debt will skyrocket to 190% of GDP, well beyond the threshold envisaged in the plan signed by the EU and the IMF.
The compromise between the EU and the IMF therefore does not appear to be a viable path. Meanwhile, however, it is approaching the next meeting of the Eurogroup, scheduled for 20 November. The Greek crisis will naturally be at the center of the meeting. And the markets expect a solution to finally arrive after months of delays.
