A return to Greece ..... still lovely, and still in deep water

A return to Greece ..... still lovely, and still in deep water

ref :-  "Greece's Deadlocked Debt Talks Unnerve Investors" , The Wall Street Journal, Markets

Considering that not so long ago we could barely turn our attention away from Greece and whether she would Default / Leave the Euro / Leave the EU, like much of the media we've been a little remiss in ignoring her of late. Actually, it's not so much a case of ignoring the Greek issue, it's just that certain other developments have been capturing the spotlight . You know ....  Brexit, Trump, that kind of thing. Anyway, Greece is certainly exercising the minds of investors once again .... and not in a good way.

So then, what's new with Greece .... that beautiful cradle of civilization and economic basket-case ? Sadly, not a lot and that's not good news. Most observers felt that when Greece and her creditors cobbled together a deal last time around, it was a short-term "sticking plaster" solution and that the problem had only been postponed. It looks very much like that is proving to be the case, and the immediate issue at hand is that Athens must secure further aid before Euro 6 billion is repaid in July. Negotiations with creditors within the Eurozone and at the IMF are at a standstill, apparently. Deja vu , anyone ?

Yields on Greek debt have been soaring in a surefire sign that default concerns are once again on the rise. The issues that have brought about deadlock will sound very familiar, but there are some added complications this time around that will not make a solution any easier to find.

Essentially, the IMF believes that Greece's debt burden is too onerous for it to receive further help in the form of loans, and that Greece must receive some kind of debt relief before the IMF can participate in any new aid package. The Eurozone creditors, especially Germany, do not want to consider debt relief but won't continue aid to Greece unless the IMF do the same. That's a pretty obvious dilemma, particularly as Greece will not contemplate any further budget cuts.

But if that's all a bit "same old, same old" , there are three further factors  complicating the issue :

   What position will the US (under the new Trump administration) take ? Remember, the US is the IMF's largest stakeholder.

   The IMF is holding its board meeting as we speak and will their position have changed any ? First indications are that it will not have done but clarity is needed.

   A raft of crucial European votes begin with the Dutch election on March 15th. If no progress is made immediately, further negotiations may have to wait until after that time.

We've been here many times before of course, with Greece tiptoeing along the edge of a precipice before somehow a deal is stitched together. But Greece has defaulted to private investors once before (in 2012), and speculation that it could happen again is bound to increase the longer the deadlock continues. Beyond that, the possibility of Greece quitting the euro is being discussed both in Athens and elsewhere (Berlin ?) . It's not the official line of course, but it is a measure of things hotting up again. The Greek issue may have been on simmer for a while, but without a radical change of heart by one party or another it could be boiling over again by the summer.