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Is Greece’s 5th bailout tranche in danger?

Is Greece’s fifth loan tranche in danger? Will 12 billion euros be locked in the pockets of IMF, EU and ECB? Will we default? No, I don’t think so. Then it’s not in the interest neither of IMF, nor the EU nor the ECB to deprive Greece from life-securing cash. However the so-called Troika-guys are surely going to put pressure on Prime Minister Papandreou’s government to implement up to the last comma and semicolon the provisions of the Memorandum of Understanding, whatever the political cost will be. The €12 billion tranche is part of the €110 billion bailout. The Troika-guys are arriving in Athens  tomorrow, May 2, 2011.

Greek economic portal Capital.gr has the story of pressure…

The disbursement of the fifth €12b tranche from IMF/EU/ECB to Greece won’t be easy, as the review of the implementation of the Memorandum of Understanding will be accompanied by a “political” issue.

Sources told Capital.gr that troika has already formulated a response to Greek government ahead of its representatives’ arrival in Athens. 

Troika has decided to demonstrate regardless of any political consequences that the way Greece is implementing the Memorandum is responsible for any deviations, not the Memorandum itself. 

IMF/EU/ECB representatives will insist on a strict attitude on Greece’s political responsibilities, blaming ministers for the delays. The situation would be politically manageable for the government, if the issue stopped there. 

But if the figures are proved not good enough, troika may raise the issue of non-disbursement of the fifth instalment in June. There is growing talking in the EU for sending out a message to the troubled economies of the Euro-zone through Greece, however a failure to release a tranche could cause dramatic developments through the uncontrollable debt restructuring.

The possibility of Greece’s failure to repay interest and debt to Greek and foreign bank has been ruled out by IMF, ECB and EU. A promoted solution has been the release of a part of the tranche that would be sufficient for the repayment of debt until August in order to avoid a default. 
But it wouldn’t be enough for the country’s needs for salaries, pension, education, health, etc, which should be covered by the government’s revenues and publishing of treasury bills in the internal market.

In fact, this solution would ensure the normal continuation of debt servicing, but it would also lead to a semi-suspension of payments in the country, with unpredictable political consequences not only for the stability of the government but also for the possibility of political addressing of the crisis that it would cause. 

Some sources in Brussels note that this could be proved a “dangerous game” for the Euro-zone, but also insist that Greece has shown recently that it is willing to “blackmail” troika on the grounds that the planning of Memorandum is responsible for the bad results of fiscal adjustment.  

The possibility of a positive review of the Greek program is not ruled out, meaning that the second quarter of the year will be the same as the first. However, such a possibility is not likely, based on the figures that troika officials hold.

 
Welcome to the new round of economic and political tension. And have a nice day!

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