Why Greece currently has leverage over all troika members


It all seemed positive yesterday, as Germany blinked and was ready for another can kicking exercise, accepting only one Greek reform for the time being. But as we noted, the IMF is a hurdle. And indeed, the IMF delegation, that officially “never leaves the table”, just did it and put all the blame on Greece.

The IMF news came 10 minutes after the Athens stock market closed 8% higher on the optimism about a happy end. Everything seems darker now. It’s not only the IMF. Also other European officials, Juncker and Tusk, urged a compromise from the Greek side and made it clear that this is a “last throw of the dice”. Pressure seems to be mounting on Greece to accept the June 3rd proposal which it publicly rejected. But is the pressure really on Greece? Here is why Greece has leverage over all the three sides of the troika:

  1. ECB: Mario Draghi’s institution owns the printing machine, so there’s no money to really lose, but it does have a lot of credibility at stake. The ECB has been practically supporting a Greek bank run: Wednesday after Wednesday, they have enlarged the Emergency Liquidity Assistance (ELA) to Greek banks, bringing it to €83 billion. The Greek banks are not in a good situation. The ECB has the impossible dilemma: if can either throw more money or cut its losses. At this point, the losses are huge. Upon a Grexit, Greek banks will likely collapse and the ECB will be in emergency mode.
  2. IMF: The IMF has already seen Greece delay a payment, using the “bundling” option last used by Zambia in the 80s. If Greece doesn’t get fresh IMF/EU/ECB money, Greece will default on it, and that’s trouble for the IMF. As the US is the biggest shareholder of the IMF and this country doesn’t want Greece looking to Russia for help, the IMF could change course, but this is less likely. The IMF seems to look for an exit. And that puts the pressure on Merkel.
  3. EU: The European Union is basically led by Germany. Merkel has shown flexibility in the past and knows how to calculate political risk. Upon a Grexit, her Greek policy in the past 5 years will go down the drain, and so will taxpayer money. So far, the German taxpayer only guaranteed loans to Greece. On a Grexit and devaluation of the drachma, the money is gone. Isn’t it better to cut a deal, even without the IMF?

All in all, the stakes are currently much higher for all creditors than they were beforehand. Throwing good money after bad seems to the better option than letting it all explode.

What do you think?

June 18th is now the new date in which leaders convene and this is marked as the final deadline before the bailout expires on June 30th, the day that Greece has to pay the IMF its “bundled” €1.5 billion.

Will Greece break down as creditors want it to? Or will Tsipras continue smiling, eventually praising Merkel for her courage?

More: State of EUR/USD – The fall, the recovery and what’s next

In our latest podcast, we bring you up to speed with the Fed decision and the USD impact, and also tackle the Greek crisis from two different angles.

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About Author

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. I think you are right, and I believe this is exactly how the Greek see it also and the parties concerned as well of course. So everybody knows the situation, namely that Greece can pull out of the Euro, albeit with some damage but they can start with a clean sheet, and in a couple of years they will be laughing all the way at the Banks. The EU and IMF cannot do anything, because of promises they made to their constituents. The Greec won’t pull out by themselves just like that, because they will loose face that way. They will pull out by default when they can’t pay. So it is stand-off right now, and each party is waiting for the other to blink. Only a third party, one that has not been involved, can break the stalemate. It could be the UK.

  2. Hassan G. on

    I wouldn’t call the first case against the ECB leverage. Just because it can print money does not mean they will have money that they can use without fear of inflation. Remember, money is based on its value, not its quantity. As for the leverage against the EU, it doesn’t mean much at all. What are you trying to say? That Germany has more to lose in the Grexit? No way in a thousand years will Greece be better off with them leaving the EZ. Reading this article, I don’t think you really know what ‘leverage’ means.
    I wish people who write these articles would do more research on it and put actual information that the majority of people don’t know or would like to know. But thanks for the review Yohay!