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Greeks Bearing Debts
The Enron of the Aegean

IMF officials convened in Dresden are barking at Greece, but will they bite? IMF head Christine Lagard’s comments that Grexit was “a potential”, and her insistence that this would not mean the end of the euro, have gotten a lot of press. But buried further down in reports lies a detail more telling in the grand scheme of things. As The Financial Times article on the meetings reports:

Ms Lagarde’s admission came as the IMF offered Greece three more weeks to repay €1.6bn it owes to the fund next month, insisting that Athens still had a long way to go to persuade creditors to unlock desperately needed bailout money. […]

The IMF confirmed on Thursday that Athens would be permitted to delay all its June repayments until the end of the month, removing the threat that Greece could default as soon as June 5, when €300m falls due.

The last time the subject of deferral came up was when the Greeks requested this exact favor in April—and were huffily and publicly rebuked by Lagarde and the IMF. “Payment delays have not been granted by the board of the IMF in the last 30 years,” Lagarde said on April 17.

This has been the story of the Greek negotiations—tough talk and can kicking. And not only are the potential costs of any outright breach dizzying (though critics are right to note that kicking the can just makes the eventual bill higher when/if it comes due), but nobody is even sure what exactly they are. As Jacob Soll noted in a column in Politico Magazine earlier this week, due to differing accounting standards, estimates of Greece’s debts can range from $36-$350 billion. The upper estimate is backed by Germany; the lower by Greece—but international accounting standards may well give the advantage to Athens.

So why has Greece not pushed this advantage harder? Because verifying it would require Athens to open its books to public scrutiny—something that (in a refrain that is very familiar to those who remember Greece’s accession to the euro in the first place) it is deeply unwilling to do.

And so, when you, dear reader, start to ask yourself for the umpteenth time why the Greek crisis keeps going and going, remember that at least some of it is driven by fear of what a final breach would uncover—and that what lies underneath was built by people very much like those making such a hash of things today.

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  • Ellen

    Yes, this whole story has gone way beyond an issue of finance to one of criminal intent and incompetence of the entire Eure-elite, with one exception – Angela Merkel. She is bringing this whole unsavory reality to light by insisting on austerity. What if it kills the Eurozone, and even the EU?

    What makes you think that Merkel and her German financial backers don’t want to kill the Eurozone and EU? Germany has severe and even existentially threatening demographic problems which it cannot overcome unless German women start having more babies. But in the present tense, they are one of the few countries in Europe that still has a globally competitive economy and a work ethic. Why would they want to be saddled with a bunch of decaying parasite countries requesting endless handouts? This crisis will end with Grexit, a return to the Drachma, and a return to a Europe of national states. The whole EU period will be remembered as nothing but a short interval in European history.

    • Eurydice

      Well, Germany and France were the initital architects of the Euro and were happy to invite those decaying parasite countries to join in, as long as they provided new markets for French and German goods. Germany then was not so globally competitive, still having digestive problems from assimilating East Germany.

      But now, yes, it’s a good time to walk away from the shambles of this experiment, which was never workable and is no longer politically desirable.

      • Ellen

        You are right about the German-French contribution to the current mess, which is simply – as you say- another reason to disband the EU. German banks lent money to the Greeks knowing full well that it was not likely ever to be repaid. So why did they take such a risk? Because, one of the clauses of the loan agreements was that the Greeks had to use a certain percent of this money to buy German products. So, it helped expand the German export market in Southern Europe (ditto for loans to Italy, Spain and Portugal). When the inevitable Greek insolvency would finally put a stop to this ponzi scheme of loans and purchases of German products, the German banks would then go crying, cap in hand to the German government and the EU leadership. They would then get bailed out by German gov’t or EU or IMF money. That was the whole deal. Everyone assumed that the German politicians and IMF would never let a European country go bankrupt. Germany’s war guilt was worth a whole lot of living beyond one’s means for all the Southern Europeans.

        Now, however, the joy ride seems about to end. Someone will finally shoot this lame horse and put it out of its misery. The question is, WHO?

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