Let us put it this way, if one does not pay the others – in difficult times – will do the same. Euro, Eurozone, commercial agreements and political cooperation will collapse. Greece is unable to pay its debts and fear is spreading across the Eurozone because its behavior may infect other countries and push them to exit the Eurozone.
The Minister of Interior Nikos Voutsis openly declared, “The payment amount for the International Monetary Fund (IMF) is €1.6 billion. We are not going to pay because we do not have the money”. Hence, Greece is not able to pay its debt to the IMF because it does not have the money.
Looking at the geopolitical scenario, Greece exiting the Eurozone may bring it nearer to Russia, and this would change the current global balance. Let us not forget that just a few months ago; when tension between Tsipras and Merkel was at its peak, Putin was eager to state his support to Greece. This was a political move more than an economic one.
Greece’s incapacity to pay the IMF is going to be closely followed and tumultuousness is right around the corner. Nevertheless, it is worth mentioning that tension is not as high as it was five years ago, the market seems to be calmer about this subject.
This calmness seems to give a double message: no one believes that Greece will actually exit the Eurozone, or that it will have a dramatic impact, as the 2012 50% haircut was not as dramatic as expected. However, there is also a third hypothesis: Athens may use parallel currency (IOU); it is like an “I will pay you” promise to honor wages and retirement fund. Controls will be extremely attentive because there is the risk of a massive stampede.
Anyways, this is just the same all story, it seems that history has witness many countries unable to pay their debts. In November, the Economist recalled that during the last two centuries, Greece and Argentina were unable to pay seven and eight time each. Concerning the impact on the market, it is better to look at the Goldman Sachs’ analysis about four crisis: Tequila (1994), Asiatic (1997-1998), Russia (1998) and Argentina (2000-2002). Local currency in 19 countries fell by 47% (65% in dollars) for 22 months and the rise in the 12 months after this period of crisis was by 107%. In worse situations, local currency collapsed by 61% (85% in dollars) for 20 months, and then bounced down by 150%. All these speculations are worth something if, and only if, the Greek local currency will still be the Euro. This is the biggest unanswered and most worrying question …
Translation provided by Mary Ann D’Costa