May 23, 2023
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Planning and Guidance, Tailored To Your Life and Goals
Posted on June 30, 2015
<![CDATA[Not quite as popular as Branjelina and Kimye, ‘Grexit’ (short for Greek Exit) has gained traction as a nickname during the past few months. The British press appropriated a variation, Brexit, when they discovered that the Bank of England was researching the potential risks of renegotiating membership in the European Union, or possibly even leaving the group—but that’s another story. This is about Greece, and it’s a Grexhausting tale. Last week, The Economist explained the state of affairs this way,
“…euro-zone finance ministers failed for the third time in four days [on June 25] to find a breakthrough in their talks over Greece’s bail-out…But four days before its twice-extended bail-out expires and a €1.5 billion ($1.7 billion) payment to the [International Monetary Fund] IMF falls due, Greece and its far-left prime minister, Alexis Tsipras… still have no deal.”By Saturday, a deal was off the table. After days of negotiations, CNN Money stated, “Prime Minister Alexis Tsipras…could not accept the terms being offered by Europe and the IMF. He said he would recommend that Greeks vote against them in a referendum on July 5.” The move was perceived to be a delaying tactic and, when Greece requested bailout extension, European finance ministers refused. Greece owes about 1.5 billion euros to the IMF, and a payment is due on Tuesday. In the meantime, the European Central Bank (ECB) has been providing emergency funding—a line of credit currently worth about $95 billion—to keep Greek banks from collapse. It’s unclear whether Greece will be able to make the payment due to the IMF this week. If it does not, Bloomberg Business reported the country is at risk of joining a rather disreputable club: countries that have failed to repay the IMF on time. Current membership includes Sudan, Somalia, Zimbabwe, Cuba, Cambodia, and Honduras. CNN Money explained that Greeks are queuing at ATMs, banks are strapped for cash, and the European Central Bank may decide to curtail emergency funding. On Sunday, in an attempt to manage the financial fallout, Greece decided to keep its banks closed on Monday and close the Athens stock exchange. One expert cited by the International Business Times suggested that a Greek default could make international credit markets unavailable to the country for many years. In addition, Greece may experience rapidly accelerating inflation and economic decline. If the economic effects of default prove less dire than anticipated, other debt-strapped Eurozone countries such as Italy, Spain, and Portugal, may decide to follow suit. The possibility has many worried about the future of the Euro. There is a good chance markets will be volatile this week as events play out.