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Monday, June 20, 2011

The Greek Crisis: What next?

With the Greek and eurozone debt crisis showing no sign of easing, let's try to assess the state of affairs - and what could happen over the next few weeks:
  • Last Friday, French President Nicolas Sarkozy and German Chancellor Angela Merkel made clear in a joint press conference that they were both calling for a "voluntary" participation of private investors in a second Greek bail-out, removing a stumbling block to an EU agreement on a second Greek bail-out (Germany had indicated that it wanted some sort of mandatory involvement from creditors);
  • Greek Prime Minister George Papandreou confirmed over the weekend that a new loan "roughly equal" to the €110bn one agreed last year was being discussed;
  • However, after an emergency meeting and hours of endless discussions, eurozone finance ministers have agreed to delay any decision on Greece until next month. In other words, Greece will get a new rescue package and the next instalment of its first bail-out only if the Greek Parliament adopts the new austerity package, worth €28bn.
So what next for Greece? Here are a couple of key dates you should really write down in your calendar if you want to stay on top of the Greek crisis:
  • Tomorrow, the Greek Parliament will vote on the new cabinet. It's a vote of confidence, and if Papandreou and his ministers don't win it, early elections may be called. This would delay the approval of the new austerity package;
  • On 23-24 June, EU leaders will meet in Brussels. They are expected to confirm that Greece must commit to a new round of austerity measures if it wants to receive fresh aid. More details of the second Greek bail-out will be decided, particularly in regards to the way in which private creditors will contribute to a second bail-out;
  • On 28 June, another key vote will take place in the Greek Parliament. This time, Greek MPs will vote on the €28bn austerity package which will allow Greece to get fresh money from the EU/IMF and avoid a default. The outcome of the vote is far from certain, as Papandreou's government currently holds a tiny 5-seat majority in Parliament;
  • On 3 July, eurozone finance ministers will hold another emergency meeting to take stock of the situation in Greece. By then, they hope that the Greek Parliament will have given the go-ahead to the new austerity package. If this is the case, they may decide to unblock their share of the payment of the next instalment of the first Greek bail-out loan, which together with the IMF's share is worth €12bn;
  • On 11 July, eurozone finance ministers are expected to make their final decision on the second Greek bail-out.
So expect EU leaders and markets to remain on the edge of their seats over the next few weeks. As ever, it's a race against time. Greece has some debt repayments to make by mid-July and will be forced into bankruptcy if it fails to secure further EU/IMF financing.

Tomorrow, we will publish a new briefing on the implications of a second Greek bail-out and a likely default. Stay tuned.


John McClane said...

Maybe Turkey could help bail out Greece. It's one of the BRICs. With quid pro quo that Greece and its proxy Greek Cyprus stop blocking Turkey's application for membership of the EU.

But then again maybe Turkey is no longer interested in joining the EU.

Doug said...

other key dates are those upon which interest is due on outstanding bonds. Do you know how much and when? Failure to pay is itself default.

Anonymous said...

The greek politicians are big traitors and they serve the banksters.They do not save the greek people but the banks.They will pay for it because there is no place to hide themselfes together with their masters, the banksters.
We the greeks never forget

john moir said...

nd I commend this. Might I ask whether the think tank has views on the possibility that the Greek people will revolt against the austerity measures and whether a military coup will result. The last such coup was in 1967 so the greeks have form here. With the 40% youth unemployment and a hated government and a very large army with leaders who will be familiar with history surely the possibility is not altogether impossible. Nobody has even broached this outcome. Surely the silence just makes it more likely. What do we think the generals and colonels are diccussing ever their nightly glass es of ouzo?

Anonymous said...

With incredibly annoying most people on this planet believe that the Greeks are lazy.
Of course they forget that the Greeks gave generously to the people for democracy,
iterature, arts, culture, science, philosophy, sports.

While Europe forgets easily, that 'lazy' Greeks fought in ancient times and their own freedom.

Definitely did not expect sympathy from you. Always we manage ourselves.
But at least due respect to the Greek people.

Anonymous said...

GREECE BANCRUPT? Why don’t see it this way? [Found on a forum. Interesting.]

All of us in this world worked and had a living until recently. Suddenly the money is gone. Where has it gone? Well, we, the people, make money by contributing something to society. That makes the real money circuit. Others make money with money, they donĂ¢€™t contribute anything to our society but only suck real money out of your purse. Money is not a commodity but is to make barter easier. When we put 100 dollars of our real money into a bank, the bank is allowed to lend the real-money makers [us, workers] ten times the amount you put in or 1000 dollars. You think it is money but it is credit only, it has no value at all. Immediately they start cashing in, say 7% real money for it from you, or 70 dollars a year while you get 2% for your 100 dollars in their bank that make
their business possible, so you get 2 dollars. Thus they make 35 times more than you do and on money that does not even exist. With their profit [interest], being your real money from labor, they buy up the world and return your real money to your real money circuit to start the game all over again. That way they become richer and richer with fake money without contributing anything to society. They eventually finance wars to keep their business going. When they overdo this, people are going short on their real money from labor and that is what causes the trouble in Greece. But don’t bother. They are not the only ones. This is happening all over the world now so stay put. Always realize that there are two money circuits: a real one and a fake one which is 10 times or more bigger and which is what the rich live on and keep us in line. Oh, there is a third circuit within the real money circuit from work: the black money circuit. But that is real money without paying tax for our society. In some countries it is 40% or more. Eliminate it and the country goes bankrupt. Is everything clear now? To stop them from draining you, put as little money in the bank as is necessary for barter and don’t borrow fake money.