Greece faces a real threat of default as the Greek government cannot contract for another multi-billion loan.
According to some experts, in order to pay off its T-bonds Greece needs at least €30B. But the debt-ridden country doesn’t have the money. The IMF and the EU haven’t still decided on whether to bail out Greece once again. There are concerns that neither of them will do that. In this case Greece is sure to default on its debt.
Financial aid from the European Union: pros and cons
Why is the EU not in a hurry to save Greece from default? According to the West European Association of Traders and Investors under , the following factors should be paid attention to:
· According to Jean-Claude Juncker, Prime Minister of Luxembourg and President of the Euro Group, Greece should take all the austerity steps necessary to reduce the budget deficit as soon as possible. Only under such conditions the EU will consider the possibility of 'soft' restructuring for the Greek debt.
· According to him, the IMF may also cancel the decision to help Greece. The Greek authorities used to wait for a €12B loan (the IMF - €3.3B from, the EU – the rest). Now the loans are under question.
In the meantime the IMF questions Greece’s ability to provide guarantees for the loan. Without it the IMF won’t lend the money to Greece while the chance of the debt-ridden country providing such guarantees is minimal.
So it seems more and more probable that Greece won’t be able to allocate the money to pay off its T-bonds.
The situation is complicated because to let Greece default on its debt means to hit the entire financial system of the EU and the Euro-zone. Nevertheless, Germany, Netherlands, Finland and other countries are determined to prevent Greece from receiving another loan from the EU. Yet Greece won’t probably see any loan from the IMF until June 29th. Still the debt-ridden country desperately needs €13.4B to pay off its T-bonds.
If Greece defaults on its debt what will be the consequences for the country itself and for the entire EU?
According to the German Minister of Finance Wolfgang Schäuble, if Greece defaults on its debt the consequences will be unpredictable because this is the only union, the members of which have the same common currency, so nobody knows for sure what impact the bankruptcy of its member may have on the entire union:
Another way to save Greece is to postpone the withdrawal of the funds invested in the Greek T-bonds. However the ECB doesn’t feel like agreeing to such a step.
No doubt that Greece is shocked with the tough conditions which should be met in order to get the required aid from the financial institutions. Greece has already started blackmailing the EU – either we get the money or we leave the Euro-zone. Some Greek politicians say that Greece is really close to leaving the Euro-zone. Greece will do it if it fails to come to terms with its lenders.
The thing is that the EU financiers understand that Greece doesn’t have (and won’t have in the near future) the money to pay off the debts while new loans will only increase the country’s sovereign debt, aggravating the situation.
According to some experts from , the strongest EU economies have an extra problem: if Greece defaults on its debt, Ireland and Portugal may follow its example, seriously damaging the Euro-zone. Is the EU ready for such consequences?
· This is a dilemma for financiers: to let Greece default on its debt, to get ready for a wave of defaults and to jeopardize the Euro currency or to save Greece once again, giving the sick economies to understand that they can keep doing what they want because the EU will bail them out in any case.
· The Greek debt has already reached 140% of the GDP, which is not that fatal. But the debt is fairly expensive – the interest rate is 20% per annum - which leaves no chances for the “weak” Greece to pay off its bonds for its own account.
· If Greece abandons the Euro zone, it may cause excessive money-printing, which will result in growing inflation, devaluation and worsening of the country’s living standards.
What will be the Euro currency rate in the near future? According to the Department of studying Masterforex-V trading system , the mid-term trend of EURUSD is still bullish. The rate is currently forming a short wave b(C ) as a retracement against the uptrend or a new (potentially reversal) bearish wave of the senior timeframe. A break below the defensive MF pivot 2 and the “blue” SC (as shown below) will be the first signal indicating a reversal:
a) Until pivot 2+SC stay untouched, b(C ) and c(C ) are probable
b) Once they are overcome = potential reversal wave A
ü watch the correction grid of the senior TF; B+ FZR = full-grown FZR = change of trend
ü breaking above the high of а(С)/С; wave level increase; the formation of another bullish reference point; a new short bullish wave а(С)/С
.png)
