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Friday, June 21, 2013

Greece Stares Into the Abyss Again

The International Monetary Fund (IMF) is preparing to suspend aid payments to Greece by the end of next month unless eurozone leaders plug a €3bn-€4bn shortfall that has opened up in Greece’s €172bn rescue programme, according to a report in the FT.

The shortfall has arisen as a result of a decision by  eurozone central banks not to roll over Greek bonds they hold, and comes amid signs that even the scaled-back privatisation plan Athens agreed to last year is falling behind schedule.

There is still a chance for Greece to receive the next tranche of aid if it manages to reach a deal with the troika before the end of June. However, the coalition government in Greece is on the verge of collapse as a result of its failure to internally agree on how to resolve the crisis caused by the decision to close the state broadcaster.

As ever with bailouts, they are not solutions but merely vehicles for kicking the can down the round and buying time for the incumbent government to resolve the original crisis. In Greece's case there may well soon be no government to hold talks or resolve the crisis.

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