24/7 Wall St.
May 19, 2011
There has been some hope over the last several weeks that the holdouts who have resisted any restructuring of Greek debt might join other nations in the EU which want to throw another lifeline to the Southern European nation. Germany and Finland would have to be agreeable participants. Finland appears to believe that a new debt structure would be in the EU’s interests. Germany has been much slower to signal its intentions. The resignation of Dominique Strauss-Kahn as head of the IMF may slow the process further.
But, the final blow to a plan to help Greece is a new battle between the The European Central Bank and EU chief ministers and financial policymakers. The FT reports that “The ECB officials warned that any move to delay repayments would be a dangerous distraction from Athens’ economic and fiscal reform plans.” So, the financial ruin of Greece is even more probable even though the odds of a default have been put by some capital markets investors at 85%.
Greece claims that it can privatize billion of dollars of its assets. Almost no one believes that will be done efficiently. Greece cannot even hit its own budget expectations and it may drop into a deep recession which would make its deficit even worse. Each of these problems has been often and well-described, as has been the likely effect of a default or radical restructuring.
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