With Greece’s default and dropout from the Euro being so imminent that it has cold sweat running down many peoples’ necks, there still seems to be a glimmer of hope that Greece and it’s creditors might find a compromise.
There is a possible agreement in sight that might persuade European money holders to unlock some frozen aid, and prevent an apparent default. The so-called “cash for reform” package. If no resolution is found, however, we will see Greece exit the Euro, sending negative shock waves toward Europe.
However, first, representatives of European governments, the European Central Bank, and the International Monetary fund have to double check Greece’s proposal and agree on it before any fresh currency is pumped into financially starving Greece.
Stock speculators seemed enthusiastic about a probable agreement at the beginning of the week, when both the European Stock markets and Greek assets sailed upwards. Hopes are up that a last-minute deal can be clinched.
“I am convinced that we will come to a final agreement in the course of this week,” European Commission President Jean-Claude Juncker told a late-night news conference, according to other media. German Chancellor Angela Merkel was more cautious, according to Reuters. Germany is Greece’s main creditor. Commenting on whether there might be a final agreement or not, she said: “I can’t give any guarantee that that will happen.” She added: “There’s still a lot of work to be done”.
Greece has to repay the IMF €1.6 billion by June 30, or else…
Just to illustrate, roughly $100,000 dollars worth of one-dollar bills fill one barrel. We are speaking of around 10,000 barrels of one-dollar notes that Greece has to come up with by the end of this month.
Getting that much money together might be harder than it sounds. About €2 billion (about US$2.2 billion) were withdrawn in a period of three days by nervous Greeks flocking to cash machines to withdraw money. As a result, the European Central Bank last week extended its credit life line, again, to ensure that banks wouldn’t have to stay closed at the beginning of the week because their cash stocks had been depleted.
After a breakthrough was flushed down the toilet after finance ministers of the 19-nation Euro zone held talks in Luxembourg, it now really seems like it’s all hitting the fan for money deprived Greece.
IMF chief Christine Lagarde said more talking is needed, but “with adults in the room,” adding that the guillotine is falling. If Greece doesn’t make a key repayment in a couple of days, “there will be no period of grace,” she further noted.
Oops, there goes Greece
Before the emergency meeting on Monday, Greek Prime Minister Tsipras said he would work to make the meeting with euro zone leaders a “success,” and that a Greek exit, a.k.a Grexit, from the euro zone would be “very negative for the people of Europe.” Tsipras made it clear that once the Greeks are out, there’s no coming back.
“This would be an irreversible step, it would be the beginning of the end of the euro zone,” according to a quote by the Austrian newspaper Kurier.
International creditors turned their backs on Greece, refusing to pay part of the next planned bailout package, worth over €7 billion (more than US$7 billion), until Greece agrees to make further economic reforms, like changes to pensions and VAT rates.
And the ball keeps rolling
Greek Prime Minister Tsipras rolled the ball back into the creditors’ court saying they should provide a deal that would make Greece’s huge debts affordable.
“We are seeking a comprehensive and viable solution that will be followed by a strong growth package, and at the same time render the Greek economy viable,” he told foreign media. The Greek proposal included higher taxes and welfare charges, and steps to reduce early retirement. But it still doesn’t meet the standards the lenders set as a foundation for an agreement.
Not everyone shares Greece’s enthusiasm about a possible conclusion before it’s imminent default on June 30. German Finance Minister Wolfgang Schäuble is most skeptical. He told reporters earlier in the day that he sees nothing really new from Greece.
The clock is ticking and the stakes could not be higher. This is the dramatic material that blockbusters are made of. Unfortunately, this story is real, and the losses to be suffered by the people are too.