IMF tells Europe: Transfer union or big upfront haircut

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The Greek crisis rages on and the IMF provides a reality check.

Greek debt is expected to to peak at 200% of GDP in the next two years. Greece needs debt relief far beyond what Europe has been willing to consider and the alternatives are either annual transfers or a big upfront haircut.

In addition, the recent deterioration in the economy points to a bigger debt relief. The euro-zone is only considering reprofiling of the debt, and only after the first review and only as a consideration.

In the meantime, it isn’t unclear how Greece will get its bridge loan, German finance minister Schaeuble continues pushing for a Grexit, and it is unclear if Tsipras can pass the agreement in parliament. The aGreekment is clearly at risk.

Regarding the bridge loan, various EU officials say it’s difficult. The idea of using the old ESFM, that would involve the UK, was rejected by non euro-zone countries. Another idea was that France would offer a bilateral loan, but that seems unlikely as well. This is part of the original deal, not the ESM bailout that depends on the Greek parliament approving the absurd demands.

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Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

1 Comment

  1. A longer maturing period is a better solution than a financial hair cut, relief.

    If 30 years is not enough, then make it 50 years or 60 years.

    Disneyland could make a loan of low interest rate with a long payback period of 100 years.

    No one knows what the inflation rate in 30 to 60 years. The debt amount of 80 to 86 billions Euro may become smaller in value in the future.

    The longer the repayment period, the smaller is the instalment each time. This will make Greece affordable.

    On the other hand, a debt relief is absurd. This is like borrowing money has no obligation. Then, this is a new world order.

    This is probably instigated by the actual head of IMF, the USA president.

    This Obama is not an idiot. He starts the Greece hair cut financially. Then it is reasonable for other countries like Italy, Ireland, Spain and Portugal to follow. Ultimately, he is paving the road for USA to ask creditors to relief USA’s huge debts. He is not an idiot. He is smart actually. However, is he sick?

    Obama: “If Greeks Get Debt Relief So should Ireland, Italy, Portugal and Spain”

    By Krakos Mananananana 09/07/2015 12:31:24

    If Greece cannot do this long maturing loan, they should ask the Troika to help them to print drachma again in an orderly manner.

    Moreover, in a macro view, capitalism, as a free marketing economy, is for smarter people. In this economy, one has to be wise and self-disciplinary.

    On the other hand, communism, as a plan economy, is for people who do not want to plan, to organize and to be non-reliant.

    So, since the Greeks tend to be reliant, it is better to leave Eurozone.

    Capitalism is for smarter and more self-disciplinary people. For instance, one can have a loan (of paying interest only for 15 years) to invest in the stock or property market. However, this borrower can repay a bit of principle at each instalment to make his financial position safe and flexible. By flexible, it means that he accumulate money for good opportunity of investment (say IPOs for example). Anyhow, it is about self-discipline and wise financial management. As for the Greece’s case, people wonder whether they can manage and can be trusted.

    If they cannot be sure about the ability of repaying instalments, make the maturing period longer, saying 50 to 60 years.