Things had gone comparatively quiet on the subject of Greece as the Government worked on a fourth version of its reform list ahead of the Eurogroup meeting on 24th-25th April. It had expressed confidence that this would secure payment of at least part of the final €7.2bn remaining from its second bailout. Schäuble’s statement yesterday that “nobody expects that there will be a solution” at the meeting certainly poured cold water on those hopes. Greek Government has reportedly now asked the IMF for an extension to loan repayments of almost €1bn due in May. But the Fund has refused, leaving open the possibility of a disorderly default. Greece could issue IOUs to pay public sector workers and pensioners and free up money to repay its debts. Even if Greek people accepted IOUs, they could only function for a very short period. And given that the Government’s international creditors would not accept IOUs as repayment, this would still lead to a debt default. Another necessary stopgap may be the introduction of capital controls. The upshot is that Greece desperately needs to receive bailout money very soon. If an agreement is not reached next week, the Government might resort to emergency measures to avoid an immediate default and euro-zone exit. “The Greek crisis has reached a new crunch point amid signs that the Eurogroup will not grant desperately needed financial aid after next week’s meeting. Greece might resort to IOUs and/or capital controls to avoid a disorderly default and keep the banks afloat for now. But such measures would offer a temporary solution at best and could be the first steps towards a euro-zone exit.” notes Capital Economics in a report
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