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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