Samuel Johnson’s quote: "Depend upon it, sir, when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully;" springs to mind over the lingering discussions between Greece and her major creditors, the IMF and the EU. Whilst nobody is faced with execution if Greece and its creditors cannot find a mutually acceptable position, the demise of Greece within the Eurozone and, possibly, the EU itself is a real risk.
Its partners granted Greece a three month extension to its second IMF/EU bailout which was due to expire at the end of February. The intention was that this would allow the new Greek government breathing space to come up with an acceptable (to its creditors) set of propositions to replace the terms of the bailout agreement between Greece and its creditors which had been designed to reform the Greek economy and employment legislation set the nation on the path to a sustainable economic future but required extensive austerity measures. To date, this has not happened.
Syriza was swept to power on a wave of anti-austerity rhetoric and the promise that it would get the creditors to agree to a 50% haircut of Greek debt – naturally, a popular proposition within Greece, but a dubious one outside its borders. Whilst Syriza claims, with justification, that it has a mandate to end austerity and adopt a raft of society-friendly initiatives, it fails to understand that the wishes and aspirations of the Greeks carry no weight in other nations where, understandably, the people don’t think they should be asked to pick up the tab for Greek profligacy.
Without release of the final payment of €7.2 billion and the tacit support of the Eurozone and IMF, Greece will find it impossible to meet current and future obligations. Negotiations are continuing as the sands of time run out, but it is clear that Greece is no longer able to meet its financial obligations. The nation is flying on fumes… It has done what it can to recall financial reserves held by public institutions in Greece and borrowed against its own account with the IMF in order to meet a recent IMF repayment deadline. A further €300 million is due to be paid to the IMF today with repayments to them totalling €1.5 billion falling due this month. Greece has asked the IMF to allow it to repay all funds due at the end of the month, buying it a few more weeks to make a deal. Greece needs to refinance €5.2 billion in short-term loans at the end of June and should repay nearly €6 billion in July.
Nobody wants to see Greece forced to leave the Euro – certainly not the Greek people themselves, but unless Greece accepts that it needs to soften its position and not the creditors that kept it afloat in the first place, such a scenario must be increasingly likely.