Why, you might well ask (and probably have) am I spending so much time tracking the ins and outs of the Greek debt crisis? Because in the short run this is exactly the kind of scary venture into completely uncharted territory—no country has ever left the euro and in fact an exit was never even contemplated when the euro was put together—that can produce a panicked plunge in asset prices
Talks between Greece and its creditors collapsed in Brussels last night as Greek negotiators walked out after just 45 minutes. Creditor nations, and the International Monetary Fund, the European Commission, and the European Central Bank said that the newest Greek proposal was not a serious attempt to break the impasse.
After months of saying that there is no Plan B, government representatives preparing for next week’s EuroGroup meeting of EuroZone finance ministers put planning for a Greek default on the agenda for the first time
Today, the International Monetary Fund walked away from negotiations with Greece. Yesterday, Standard & Poor’s cut its credit rating on Greece to CCC just two notches above default.
European stocks—and the euro—were up strongly today on a belief that the German Chancellor has blinked in the showdown between Greece and its creditors
The most effective pressure looks to be coming from Greek savers who withdrew 4.9 billion euros from Greek banks in April and probably more in May. Deposits last week dropped below 130 billion euros, down from 150 billion in 2112
Despite the chaos I’m more optimistic on a deal to release the 7.2 billion euro extension. I just hope that everybody realizes that projections say Greece will need 30 billion euros more by September
There’s been some progress on taxes. But there’s been almost no movement on pensions with creditors—the International Monetary Fund, the European Commission, and the European Central Bank—holding to their position that the system isn’t sustainable without cuts to benefits.
There’s certainly no negotiating going on in the Greek debt crisis. Greece submitted its final proposal last night—before seeing a proposal from its creditors. Those creditors submitted their own proposal this afternoon.
